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October 22, 2014

Homework Help: Finance

Posted by Christian on Thursday, September 27, 2012 at 10:16am.

Suppose that five years ago Cisco Systems sold a 15-year bond issue that had a $1,000 par value and a 7 percent coupon rate. Interest is paid semiannually.

a. If the going interest rate has risen to 10 percent, at what price would the bonds be selling today?

b. Suppose that the interest rate remained at 10 percent for the next 10 year. What would happen to the price of the Cisco Systems bonds over time?

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