Assuming that the current interest rate is 3 percent, compute the present value of a five-year, 5 percent coupon bond with a face value of $500. What happens when the interest rate goes to 4 percent? What happens when the interest rate goes to 2 percent?
Instruction: Round your answers to the nearest penny (2 decimal places).
PV at an interest rate of 3% = $
PV at an interest rate of 4% = $
The present value (Click to select) fallsrises when the interest rate rises to 4 percent. PV at an interest rate of 2% = $ The present value (Click to select) risesfalls when the interest rate falls to 2 percent.