Problem $10-2$ Determining Interest and Approximate Bond Value $[$LO$2]$

Assume that three years ago, you purchased a $10-$year corporate bond that pays $5\mathrm{.}5$ percent. The purchase price was $$1,000.$ Also, assume that today comparable bonds are paying $4\mathrm{.}5$ percent.

a$)$ What is the annual dollar amount of interest that you receive from your bond investment? $($Omit the $"$$$"$ sign in your response.$)$

Amount of interest $

b$)$ Assuming that comparable bonds are paying $4\mathrm{.}5$ percent, what is the approximate market price for which you could sell your bond? $($Round your answer to $2$ decimal places. Omit the $"$$$"$ sign in your response.$)$

Market price $

c$-1)$ Did the bond increase or decrease in value?

multiple choice $1$

Decreased in value.

Increased in value.

c$-2)$ Why did the bond increase or decrease in value?

multiple choice $2$

Because market rates increased.

Because market rates decreased.