Suppose a firm estimates its cost of capital for the coming year to be 10 percent. What are reasonable costs of capital for evaluating average-risk projects, high-risk projects, and low-risk projects?

A) Several years ago, Castles in the Sand, Inc. issued bonds at face value at a yield to maturity of 7 percent. Now, with 8 years left until the maturity of the bonds, the company has run into hard times and the yield to maturity on the bonds has increased to 15 percent. What has happened to the price of the bond?