2 7 points Problem 10-11 (Algo) Effect of maturity on bond price [LO10-3] Refer to Table...

Transcribed Image Text:

2 7 points Problem 10-11 (Algo) Effect of maturity on bond price [LO10-3] Refer to Table 10-2. a. Assume the interest rate in the market (yield to maturity) goes down to 8 percent for the 10 percent bonds. Using column 2, indicate what the bond price will be with a 5-year, a 10-year, and a 15-year time period. Maturity Bond Price 5 year 680.58 eBook 10 year S 463.19 15 year S 315.24 References b. Assume the interest rate in the market (yield to maturity) goes up to 12 percent for the 10 percent bonds. Using column 3, indicate what the bond price will be with a 5-year, a 10-year, and a 15-year period. Maturity 5 year 10 year 15 year Bond Price c. Assume the interest rate in the market (yield to maturity) goes down to 8 percent for the 10 percent bonds. If interest rates in the market are going down, which bond would you choose to own? 5 Years O 10 Years O 15 Years d. Assume the interest rate in the market (yield to maturity) goes up to 12 percent for the 10 percent bonds. If interest rates in the market are going up, which bond would you choose to own? 5 Years 10 Years O 15 Years 2 7 points Problem 10-11 (Algo) Effect of maturity on bond price [LO10-3] Refer to Table 10-2. a. Assume the interest rate in the market (yield to maturity) goes down to 8 percent for the 10 percent bonds. Using column 2, indicate what the bond price will be with a 5-year, a 10-year, and a 15-year time period. Maturity Bond Price 5 year 680.58 eBook 10 year S 463.19 15 year S 315.24 References b. Assume the interest rate in the market (yield to maturity) goes up to 12 percent for the 10 percent bonds. Using column 3, indicate what the bond price will be with a 5-year, a 10-year, and a 15-year period. Maturity 5 year 10 year 15 year Bond Price c. Assume the interest rate in the market (yield to maturity) goes down to 8 percent for the 10 percent bonds. If interest rates in the market are going down, which bond would you choose to own? 5 Years O 10 Years O 15 Years d. Assume the interest rate in the market (yield to maturity) goes up to 12 percent for the 10 percent bonds. If interest rates in the market are going up, which bond would you choose to own? 5 Years 10 Years O 15 Years