Final answer:
When interest rates rise, the value of existing bonds decreases. You would expect to pay less than $10,000 for the bond. To calculate the actual price you would be willing to pay, you can use the concept of bond pricing and discount the future cash flows using the current interest rate.
Step-by-step explanation:
To calculate whether you would expect to pay more or less than $10,000 for the bond, you need to consider the relationship between bond prices and interest rates. When interest rates rise, the value of existing bonds decreases. This is because newer bonds with higher interest rates offer investors better returns compared to older bonds. Therefore, given the increase in interest rates from 6% to 9%, you would expect to pay less than $10,000 for the bond.
To calculate the actual price you would be willing to pay for the bond, you can use the concept of bond pricing. Bond pricing involves discounting the future cash flows (interest payments and principal) using the current interest rates. In this case, you can calculate the present value of the future cash flows (interest payments and the final principal payment) using a discount rate of 9% (the current interest rate). The sum of these present values will give you the price you would be willing to pay for the bond.