A bond you are evaluating has a 10 percent coupon rate (compounded semiannually), a $ 1,000 face

Question:

A bond you are evaluating has a 10 percent rate (compounded semiannually), a $ 1,000 face value, and is 10 years from maturity.
a. If the required rate of return on the bond is 6 percent, what is its fair present value?
b. If the required rate of return on the bond is 8 percent, what is its fair present value?
c. What do your answers to parts (a) and (b) say about the relation between required rates of return and fair values of bonds?

Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a...