What is the value of a 10-year, $1000 par value bond with a 10% annual coupon if its required rate of return is 10%?
What would be the value of the bond if just after it had been issued, the expected inflation rate rose by 3 percentage points, causing investors to require a 13% return? Would we now have a discount or a premium bond?
What would happen to the value of a 10-year bond over time if the required rate of return remained at 13%? If it remained at 7%?