Maryland Department of Transportation has issued 25-year bonds that make semiannual coupon payments at a rate of 9.93 percent. The current market rate for similar securities is 10.79 percent
a. What is the current market value of one of these bonds
b. What will be the bond's price if rates in the market (i) decrease to 8.79 percent or (ii) increase to 12.79 percent
c. How do the interest rate changes affect premium bonds and discount bonds. Bonds, in general, pixel.gif (increase/decrease)? in price when interest rates go up. When interest rates decrease, bond prices pixel.gif (increase/decrease)?
d. Suppose the bond were to mature in 12 years. What will be the bond's price if rates in the market (i) decrease to 8.79 percent or (ii) increase to 12.79 percent.