2 Suppose Ford Motor Company Sold An Issue Of Bonds With A 10 Year Maturity A 1000 P 2380906

2. Suppose ford Motor Company sold an issue of bonds with a 10-year maturity, a $1000 par value, a 10% coupon rate, and semiannual interest payments.
a.Two years after the bonds were issued, the going rate of interest on bonds such as these fell to 6%. At what price would the bonds sell?
b. Suppose that, 2 years after the initial offering, the going interest rate has risen to 12%. At what price would the bonds sell?
c. Suppose that the conditions in part a existed—that is, interest rates fell to 6% 2 years after the issue date. Suppose further that the interest rate remained at 6 percent for the next 8 years. What would happen to the price of ford Motor Company bonds over time.

 

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