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?