Microeconomics 6th Edition by Robert Hall, Shirley Kuiper, Marc Lieberman

Exercise 13

Suppose a risk-free bond has a face value of $250,000 with a maturity date four years from now. The bond also gives coupon payments of $8,000 at the end of each of the next four years.
a. What will this bond sell for if the risk-free lending rate in the economy is 4 percent?
b. What will this bond sell for if the risk-free lending rate is 5 percent?
c. What is the relationship between the bond's price and the level of interest rates in the economy in this exercise?