Question 1. Find the value of a bond with the following characteristics: (a) face value of $1,000, (b) 8% coupon rate, (c) the bond matures in 14 years, (d) the market rate of interest is 6%.
Question 2. Is the bond priced in question 1 selling at a discount or premium to its par value?
Question 3. Using the information from question 1: the market rate of interest has risen to 10% and one year passed. How much would you be willing to pay for the bond now?
Question 4. Using the information from question 1, determine whether the bond is selling at a premium, discount, or par value.
Question 5. Using the information from question 1, another year goes by and the market rate of interest drops down to 8%. Is the bond currently selling at discount to par, premium to par, or at par value.