Problem:
Suppose Hillard Manufacturing sold an issue of bonds with a 5-year maturity, a $1,000 par value, a 8% coupon rate, and semiannual interest payments.
Required:
Question 1: Two years after the bonds were issued, the going rate of interest on bonds such as these fell to 8%. At what price would the bonds sell?
Question 2: Suppose that 2 years after the initial offering, the going interest rate had risen to 16%. At what price would the bonds sell?
Note: Explain all steps comprehensively.