What would you be willing to pay for a $1000 par, 6% coupon bond with 15 years until maturity if you wanted to earn a return of 7%? What if you only needed to earn a return of 5%?

Bond and stock problems | Business & Finance homework help

If you wanted to earn a return of 7%, you would be willing to pay $1,400 for the bond ($1000 par + (0.07*$1000)) = $1,400). If you only needed to earn a return of 5%, you would be willing to pay $1,200 for the bond ($1000 par + (0.05*$1000)) = $1,200).