Fix-It, Inc., recently issued 10-year, $1,000 par face value bonds at an 8% coupon rate. a. 2

Question:

Fix-It, Inc., recently issued 10-year, $1,000 par face value bonds at an 8% coupon rate.

a. 2 years later, similar bonds are yielding investors 6%. At what price are Fix-It's bonds selling?

b. What would the bonds be selling for if the yields had risen to 12%?

c. Assume the conditions in part (a). Further assume that interest rates remain at 6% for the next 8 years. What would happen to the price of the Fix-It bonds over that time?

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... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...