Suppose Ford sold at par an issue of bonds with a 15-year maturity, a $1000 par value, a 12% coupon rate, and semiannual interest payments.
(a) Two years after the bonds were issued, the going rate of interest on bonds such as these fell to 9%. At what price would an investor buy the Ford bonds?
(b) Suppose that, 2 years after the issue, the going interest rate had risen to 13%. At what price would an investor buy the Ford bonds?
(c) Today, the closing price of this bond is $783.58. What is the current yield?