Chapter 6 Practice problems 1. Suppose FINA Corp. has a bond issue [$1,000 face value] that pays a coupon of 7% per year. The bond matures in 20 years. What is the value of the bond? P0= 2. Now, assume the market interest rate stays the same, what is the value of the bond in one year from now? P0= 3. Now, suppose in the second year, (how many years to maturity?), interest rates on a similar type of bond increases to 8%. What is the value of the bond? P0= Price=P(1(1+r)n]/r+Fv/(1+r)n=70[1(1+0.08)19]/0.08+1,000/(1+0.08)11r=201=19P=100078=7Fv=1,000 4. Next, after another year, with the market rate still at 8%, what will be the value of the bond? P0= 5. Calculate the one-year holding period return between the answers in questions 3 and 4 ? % 6. 6.Next, suppose in the 10th year, with the market rate still at 8%, what will be the value of the bond