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Fundamentals of Financial Management 15th Edition

Fundamentals of Financial Management (15th Edition)

Book Edition15th Edition
PublisherCengage Learning
Section 7-5: Changes in Bond Values over Time
End of Chapter
Chapter 7, Section 7-5, SelfTest, Exercise 08
Page 245

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)

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