21. Interest Rate Risk. Consider three bonds with 8% coupon rates, all selling at face value. The...
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21. Interest Rate Risk. Consider three bonds with 8% coupon rates, all selling at face value. The short-term bond has a maturity of 4 years, the intermediate-term bond has maturity 8 years, and the long-term bond has maturity 30 years. (LO3)
a. What will happen to the price of each bond if their yields increase to 9%?
b. What will happen to the price of each bond if their yields decrease to 7%?
c. What do you conclude about the relationship between time to maturity and the sensitivity of bond prices to interest rates?
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Related Book For
Fundamentals Of Corporate Finance
ISBN: 9780073382302
6th Edition
Authors: Richard A Brealey, Stewart C Myers, Alan J Marcus
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