How is the value of a bond determined?
What is the value of a 1-year, $1,000 par value bond with a 12% annual coupon if its required rate of return is 12%? What is the value of a simular 10-year bond?
What would be the value of the bonds described in question 2 if investors required a 15 percent return? A 9% return? What would happen to the value of the 10-year bond over time if the required rate or return remained at 15%? Remained at 9%?
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