Q. # 1- Suppose Ford Motor Company sold an issue of bonds with a 15-year maturity, a $1,000 par value, a 12 percent 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 percent which serves the purpose of required return. At what price would the bonds sell? b. Suppose that, 2 years after the initial offering, the going interest rate had risen to 14 percent. At what price would the bonds sell?
Q. # 1- Suppose Ford Motor Company sold an issue of bonds with a 15-year maturity, a $1,000 par value, a 12 percent 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 percent which serves the purpose of required return. At what price would the bonds sell? b. Suppose that, 2 years after the initial offering, the going interest rate had risen to 14 percent. At what price would the bonds sell?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Q. # 1- Suppose Ford Motor Company sold an issue
of bonds with a 15-year maturity, a $1,000 par value,
a 12 percent 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 percent which serves the purpose of
required return. At what price would the bonds sell?
b. Suppose that, 2 years after the initial offering, the
going interest rate had risen to 14 percent. At what
price would the bonds sell?
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