Question: Assuming that the current interest rate is 6 percent, compute the present value of a five-year, 5 percent coupon bond with a face value of

Assuming that the current interest rate is 6 percent, compute the present value of a five-year, 5 percent coupon bond with a face value of $500. What happens when the interest rate goes to 7 percent?What happens when the interest rate goes to 5 percent?

Instructions:Enter your responses rounded to the nearest penny (two decimal places).

PVat an interest rate of 6% = $394.69394.69 Incorrect

PVat an interest rate of 7% = $Not attempted

The present valuefallsCorrect

when the interest rate rises to 7 percent.

PVat an interest rate of 5% = $Not attempted

The present valuerisesCorrect

when the interest rate falls to 5 percent.

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