Problem:
Nedo Enterprises originally sold bonds in 2011 with a 10 year maturity, $1000 par, 6% coupon paying annual interest. It is now 2015 and 4 years later. Bonds of similar risk selling at par know have a 5% coupon rate.
Required:
Question 1: What price would bond investors be willing to pay for a Nedo Enterprise bond today? Is this at a premium or discount?
Question 2: What if the current market coupon rate was 9%-what price would bond investors be willing to pay for a Nedo bond? Is this at a premium or discount?
Please provide step by step solution and also show all work.