Last year a firm issued 20-year, 8% annual coupon bonds at a par value of $1,000.

1. Suppose that 1 year later the going market interest rate drops to 6%. What is the new price of the bonds, assuming they now have 19 years to maturity? ($1,223.16)
2. Suppose that 1 year after issue, the going market interest rate is 10% (rather than 6%). What would the price have been? ($832.70)