In: Finance
10-4 Suppose that five years ago Cisco Systems sold a 15 years bond issue that had a $1000 par value and a 7 percent coupon rate. Interest is paid semiannually.
a- If the going interest rate has risen to 10 percent, at what price would the bonds be selling today?
b- Suppose that the interest rate remained at 10 percent for the next 10 years. What would happen to the price of Cisco's bonds over time?