Question: I cannot separate this question because it is a 2 part question (Meaning it uses the same numbers) 1a) For both questions, assume the following

I cannot separate this question because it is a 2 part question (Meaning it uses the same numbers)

1a) For both questions, assume the following information concerning a US Corporate Bond:

Face Value: $1000
Time to Maturity: Four (4) years
Coupon Rate: 3% simple interest, paid annually

At the time that it is originally issued, what is the total present (discounted) value of this bond (in dollars)?

1b) Assume that almost immediately AFTER this bond is issued, the market rate of interest suddenly falls to 2%. Given the new market rate of interest, someone who already holds this bond will now be able to sell it at a premium, if desired.

What is the price (in dollars) that this bondholder would be able to charge a prospective buyer for this bond?

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