Question: B & B Limited identified a project which is significantly expected to boost the company's revenues. The investment banker for the company recommended that
B & B Limited identified a project which is significantly expected to boost the company's revenues. The investment banker for the company recommended that capital should be obtained by using debt financing. B & B Limited issued bonds on January 1, 2009, which mature on December 31, 2028. The bonds have a par value of $1,000 and a coupon rate of 8%. Coupon payments are made semi-annually. i) What would be the value of the bonds on June 30, 2021, if the interest rates had risen to 14%? ii) What would be their value on December 31, 2023, if interest rates had fallen to 6%? iii) If the bonds had a value of $975.00 on June 30, 2019, what would be their yield to maturity on that date?
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