Assume Venture Healthcare sold bonds that have a ten-year maturity, a 12 percent coupon rate with annual payments, and a $1,000 par value.
a. Suppose that two years after the bonds were issued, the required interest rate (market interest rate) fell to 7 percent. What would be the bond's value?
b. Suppose that two years after the bonds were issued, the required interest rate rose to 13 percent. What would be the bond's value?