Banana Enterprises issues a 20-year bond with a face value of $1,000 and a 5% annual coupon, and which will repay the holders $1,000 at maturity.The current rate on similar bonds is 5%.
Question 1: What is the current market price (B0) of the Banana Enterprises bonds?
Question 2: If the yield curve shifts upward by 2 percentage points. What happens to the market price of the Banana Enterprises bonds?