Avalon Inc. offers a 6 percent coupon bond that has a $1,000 par value, semiannual coupon payments and a yield to maturity of 5.25 percent. The bond matures in 9 years.
- What is the price of the bond?
- What will happen to the price if market interest rates rise to 6.45 percent?
Based on your answers, what can you say about the relationship between the price of a bond and the market interest rate? Please show how you arrived at the answers.