Crown Enterprises recently issued a bond that has a $1,000 face or par value. This bond has a coupon interest rate of 8% and has a life of 10 years.
A. If interest is paid annually on this bond, calculate the market value today at t = 0 of this bond, assumed a required return for this bond of 6%.
B. Now, assume that the required return on this bond increases to 10%. Assume also that the bond pays interest semi-annually, rather than annually. Given this new information, calculate the market value of this bond today at t = 0.