Suppose a $1,000 Par-Value Bond Was Issued Last Year with a Promised

Multiple Choice

Suppose a $1,000 par-value bond was issued last year with a promised annual rate of return (yield) of 6 percent when market interest rates on comparable securities were also 6 percent. Thus, the bond pays its holder $60 annually in interest. Today, one year later, market interest rates on comparable securities are 10 percent. The price of the 6 percent bond will approach what dollar figure?

A) $1,060
B) $940
C) $750
D) $600
E) $500