Suppose that 5 years ago Cisco Systems sold a 15-year bond issue that had a $1,000 per value and a 7% coupon rate. Interest is paid semiannually.
a. If the going interest rate has risen to 10%, at what price would the bonds be selling today?
b. Suppose that the interest rate remained at 10% for the next 10 years. What would happen to the price of Cisco's bonds over time?