Question: A 10-year, $1,000 par value strip bond is to be issued to yield 8 percent. a. What should be the initial price of the bond?

A 10-year, $1,000 par value strip bond is to be issued to yield 8 percent.
a. What should be the initial price of the bond?
b. If immediately upon issue, interest rates dropped to 6 percent, what would be the value of the strip bond?
c. If immediately upon issue, interest rates increased to 10 percent, what would be the value of the strip bond?

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