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(Step-by-Step) A $1000 face value bond has a 4 percent coupon, with interest paid annually. The bond will mature 10 years from today. What is the bond’s price

Question: A $1000 face value bond has a 4 percent coupon, with interest paid annually. The bond will mature 10 years from today.

  1. What is the bond’s price if the required return (i.e., the yield to maturity) is 3%?
  2. What is the bond’s price if the required return (i.e., the yield to maturity) is 5%?
  3. Explain in one or two complete sentences why the bond sells for a premium in part A, and a discount in part B.

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