24. You are a securities salesperson. Many of your clients are elderly people who want very secure investments. They remember the days when interest rates were very stable (before the 1970s) and bond prices hardly fluctuated at all regardless of their terms. You’ve had a hard time convincing some of them that bonds, especially those with longer terms, can be risky during times when interest rates move rapidly.

Use the BONDVAL program to make up a chart using the format shown to help illustrate your point during discussions with your clients.

Write a brief paragraph outlining your warning about bond price volatility to an elderly customer. Refer to your chart.

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The Value of a $1,000 Par, 12% Coupon Bond as a Function of Term as Interest Rates Change Bond Term in Years 1 6% Market 8% Rates 10% 12% 5 10 25