You want to buy a corporate bond that is being issuedtoday by ACME Corp. The terms of the bond are shown below:
a. Maturity: 15 years
b. CouponRate: 5.5 percent
c. FaceValue $1,000
d. Interest PaymentSchedule: Semi-annual
Please calculate the price you would pay for this bond if your required return is 8 percent.
What would you be willing to pay for this bond ifinflation was expected to increase by 4 percent and your required return jumped up to 12 percent?