Calculating going rate of interest on bonds

Reference no: EM1338752

Suppose a car company sold an issue of bonds with a 10-year maturity, a $1,000 par value, a 10% coupon rate, and semiannual interest payments.

A. Two years after the bonds were issued, the going rate of interest on bonds such as these fell to 6%. At what price would the bonds sell?

B. Suppose the interest rate remained at 6% for the next 8 years. What would happen to the price of the car company bonds over time?

Reference no: EM1338752

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