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In the case where rates went up, the bond price went below the redemption value of $1,000. It sold at a discount of $16.06. When rates went down, the price is at a premium of $16.36.
3. In order to entice investors, Hawk Inc. decided to raise the redemption value to $1,100 at the time of the final coupon payment of $40. If the level of rates for 5 year bonds is 8.4%, what would be the price an investor would pay?
4. What is the price if the required yield is 7.6%?
5. Suppose Hawk would like to keep the price at $1,000 when the required rate of return is 8.4%. How much
should Hawk increase the redemption value?
6. What redemption value would price at $1,000 if required yields are 7.6%?
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