Suppose Hillard Manufacturing sold an issue of bonds with a 10-year maturity, a $1, 000 par value, a 10% coupon rate,...

Suppose Hillard Manufacturing sold an issue of bonds with a 10-year maturity, a

$1, 000 par value, a 10% 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 6%. At what price would the bonds sell?

b.    Suppose that, 2 years after the initial offering, the going interest rate had risen to 12%. At what price would the bonds sell?

c.    Suppose, as in part a, that interest rates fell to 6% 2 years after the issue date. Suppose further that the interest rate remained at 6% for the next 8 years. What would happen to the price of the bonds over time?