Compute the present value of a five-year, 6% & 10% coupon bond with a face value of $1000. What happens when the interest rate goes down to 8%?
We have two 5 years bonds, one with coupon rate 8% and another 10%...if market rate of interest is 8% what is the value/price of the bond today.
(hint you have to calculate the PV of 1000, 5 years and coupon payments for each bond and add them together.)