1.Consider a 12-year, 12 per cent annual coupon bond with a required return of 10 per cent....

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1.Consider a 12-year, 12 per cent annual coupon bond with a required return of 10 per cent. The bond has a face value of $1000.

What is the price of the bond?

If interest rates rise to 11 per cent, what is the price of the bond?

What has been the percentage change in price?

Repeat parts (a),

(b) and

(c) for a 16-year bond.

What do the respective changes in bond prices indicate? LO 6.4, 6.6

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