Your firm, Nurse International has identified investments for your hospital in long term, fixed income bonds. Your boss is expecting you to complete a comprehensive, analytical, response to this project (details to follow). Assume your firm sold bonds that have a 10-year maturity, a 12.5 percent coupon rate with annual payments, and $1,000 par value,
a) Suppose that two years after the bonds were issued, the required interest rate fell to 7 percent. What would be the bonds’ value?
b) Suppose that two years after the bonds were issued, the required interest rate rose to 13 percent. What would be the bonds’ value?
c) What would be the value of the bonds three years after issue in each scenario above, assuming that interest rates stayed steady at 7 percent or 13 percent?
show work please