Problem: A manufacturer has experienced a market reevaluation lately due to a number of lawsuits. The firm has a bond issue outstanding with 20 years to maturity and a coupon rate of 7% (paid annually). The required rate has now risen to 10%. The par value of the bond is $1,000.
1. What would be the selling price of the same 7% coupon bond one year later, if the market interest rate remains at 10%?
2. If the 7% coupon bond with time to maturity of 20 years is selling for $901.82, what is the yield to maturity of the bond?
3. What is the current yield of this bond?
4. What is the current value of these securities?