Problem:
A middle market wholesaler is reevaluating its bonds since it is planning to issue a new bond in the current market. The firm's outstanding bond issue has 6 years remining until maturity. The bonds were issued with a 6 percent coupon rate (paid semiannually) and a par value of $1,000. Because of increased risk the required rate has risen to 10 percent.
Required:
Question 1: What is the current value of these securities?
Question 2: What will be the value of these securities in one year if the required return declines to 8 percent?
Note: Please describe comprehensively and provide step by step solution.