4 E7-37. Determining Bond Prices, Interest Rates, and Financial Statement Effects Deere & Company's 2015 10-K reports the following footnote relating to long-term debt for its equip ment operations subsidiary Deere's borrowings include S300 millon. 7 125% notes, due in 2031 high- lighted below). Long-term borrowings at October 31 consisted of the following in milions of dollars Notes and Debentures 2015 2014 4.375% notes due 2019 8-1/2% 2.60% notes due 2022 6.55% debentures due 2028 . . . . 5.375% notes due 2029 8.10% debentures due 2030 7.125% notes due 231 3.90% notes due 2042 debentures due 2022 105 ,000 1,000 500 200 200 500 105 . 250 300 250 1250 106 1250 288 A recent price quote (from Yahoo! Finance Bond Center) on Deere's 7.125% notes follows. Coupon YTM Current Fitch Type Issuer Price (76) Maturity (76) Yield (%) Rating Callable Corp Deere& CO 142.72 7.125 2031 3.623 4.992 No This price quote indicates that Deere's 7.125% notes have a market price of 142.72 (142.72% of face value), resulting in a yield to maturity of 3.623%. a. Assuming that these notes were originally issued at par value, what does the market price reveal about interest rate changes since Deere issued its notes? (Assume that Deere's credit rating has remained the same.) Does the change in interest rates since the issuance of these notes affect the amount of interest ex- pense that Deere reports in its income statement? Explain. b. C. How much cash would Deere have to pay to repurchase the 7.125% notes at the quoted market price of 142.72% ? (Assume no interest is owed when Deere repurchases the notes.) How would the repurchase affect Deere's current income? d. Assuming that the notes remain outstanding until their maturity, at what market price will the notes sell on their due date in 2031