Tuesday, July 19, 2011

Finance problem solution.?

Suppose SAS sold an issue of bonds with a 10 year maturity at $1,000 par value and 12% coupon rate. Two years after the bonds were issued, the going rate of interest on bonds such as these fell to 8%. At what price would the bonds sell? What if after two years, the going rate of interest increased to 14%, what would the sell price be?

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