A bond of Telink Corporation pays $100 in annual interest, with a $1,000 par value. The bonds mature in 20 years. The market's required yield to maturity on a comparable-risk bond is 9 percent.
a. Calculate the value of the bond.
b. How does the value change if the market's required yield to maturity on a comparable-risk bond (i) increases to 14 percent or (ii) decreases to 5 percent?
c. Interpret your findings in parts a and b.