The Altoona Company issued a 25-year bond 5 years ago with a face value of $1,000. The bond pays interest semiannually at a 10% annual rate. What is the bond's price today if the interest rate on...

The Altoona Company issued a 25-year bond 5 years ago with a face value of $1,000.  The bond pays interest semiannually at a 10% annual rate.

1. What is the bond's price today if the interest rate on comparable new issues is 12%?


2. What is the price today if the interest rate is 8%?


3. Explain the results of parts a and b in terms of opportunities available to investors.


4. What is the price today if the interest rate is 10%?


5. Comment on the answer to part d.

My teacher gave me this solution:

SOLUTION:

      P_B
= PMT [PVFA_k,n] + FV [PVF_k,n]

1. n = 20 ´ 2 = 40      k = 12/2 = 6      PMT = $1,000 ´ .10/2 = $50      FV = $1,000

            P_B
= $50 [PVFA_6,40] + $1,000 [PVF_6,40]

                  = $50 (15.046

3) + $1,000 (.0972)

                  = $849.52

Bartleby gave me this answer earlier tonight:

I need to understand how this problem works based on the solution my teacher gave me please. I'm also not clear why my teacher's answer is 849.52 and Bartleby's answer is 826.78. Please clarify