A bond issued by the Harris Corporation has a coupon rate of 9 ¼ percent. It matures in 2020.
a. If you require an 8 percent rate of return for a bond of this type, what is the maximum price you are willing to pay?
b. If the price in the market is selling for $1,055.00, should you buy this bond?
c. What would be the maximum price that you would be willing to buy it at if the required rate of return was 11 percent? Was 6 percent? What is the percent change in price given the changes in interest rates?
d. What rate of return is the market offering?