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Bond Valuation and Changes in Maturity and Required Returns Suppose Hillard Manufacturing sold an issue of bonds with a 10-year maturity, a $1,000 par value, a 10% coupon rate, and semiannual interest payments. a. Two years after the bonds were issued, the going rate of interest on bonds such as these fell to 6%. At what price would the bonds sell? Round your answer to the nearest cent. b. Suppose that 2 years after the initial offering, the going interest rate had risen to 15%. At what price would the bonds sell? Round your answer to the nearest cent. $ c. Suppose that 2 years after the issue date (as in Part a) interest rates fell to 6%. Suppose further that the interest rate remained at 6% for the next 8 years. What would happen to the price of the bonds over time? I. The price of the bond will remain the same. II. The price of the bond will rise, approaching $1,000 at the maturity date. III. The price of the bond will decline, approaching $1,000 at the maturity date. 4 -Select- v

Bond Valuation and Changes in Maturity and Required Returns Suppose Hillard Manufacturing sold an issue of bonds with a 10-year maturity, a $1,000 par value, a 10% coupon rate, and semiannual interest payments. a. Two years after the bonds were issued, the going rate of interest on bonds such as these fell to 6%. At what price would the bonds sell? Round your answer to the nearest cent. b. Suppose that 2 years after the initial offering, the going interest rate had risen to 15%. At what price would the bonds sell? Round your answer to the nearest cent. $ c. Suppose that 2 years after the issue date (as in Part a) interest rates fell to 6%. Suppose further that the interest rate remained at 6% for the next 8 years. What would happen to the price of the bonds over time? I. The price of the bond will remain the same. II. The price of the bond will rise, approaching $1,000 at the maturity date. III. The price of the bond will decline, approaching $1,000 at the maturity date. 4 -Select- v

Intermediate Financial Management (MindTap Course List)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter4: Bond Valuation
Section: Chapter Questions
Problem 21P: Bond Valuation and Changes in Maturity and Required Returns Suppose Hillard Manufacturing sold an...
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eBook Bond Valuation and Changes in Maturity and Required Returns Suppose Hillard Manufacturing sold an issue of bonds with a 10-year maturity, a $1,000 par value, a 10% coupon rate, and semiannual interest payments. a. Two years after the bonds were issued, the going rate of interest on bonds such as these fell to 6%. At what price would the bonds sell? Round your answer to the nearest cent. $ b. Suppose that 2 years after the initial offering, the going interest rate had risen to 15%. At what price would the bonds sell? Round your answer to the nearest cent. $ c. Suppose that 2 years after the issue date (as in Part a) interest rates fell to 6%. Suppose further that the interest rate remained at 6% for the next 8 years. What would happen to the price of the bonds over time? I. The price of the bond will remain the same. II. The price of the bond will rise, approaching $1,000 at the maturity date. III. The price of the bond will decline, approaching $1,000 at the maturity date. Ⓡ -Select- v 13
Transcribed Image Text:eBook Bond Valuation and Changes in Maturity and Required Returns Suppose Hillard Manufacturing sold an issue of bonds with a 10-year maturity, a $1,000 par value, a 10% coupon rate, and semiannual interest payments. a. Two years after the bonds were issued, the going rate of interest on bonds such as these fell to 6%. At what price would the bonds sell? Round your answer to the nearest cent. $ b. Suppose that 2 years after the initial offering, the going interest rate had risen to 15%. At what price would the bonds sell? Round your answer to the nearest cent. $ c. Suppose that 2 years after the issue date (as in Part a) interest rates fell to 6%. Suppose further that the interest rate remained at 6% for the next 8 years. What would happen to the price of the bonds over time? I. The price of the bond will remain the same. II. The price of the bond will rise, approaching $1,000 at the maturity date. III. The price of the bond will decline, approaching $1,000 at the maturity date. Ⓡ -Select- v 13
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