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4. Estimate the one-year rate of capital gain (%) and the rate of return (%) on different-maturity 10% coupon rate bonds when interest rates rise

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4. Estimate the one-year rate of capital gain (%) and the rate of return (%) on different-maturity 10% coupon rate bonds when interest rates rise from 10% to 20%. Years to maturity 30 Coupon rate (%) Price ($) Price Next year Rate of Capital Gain Rate of Return (8) (%) (%) 15 1 a. Explain the relationship between the coupon rate and the rate of return of different maturities. b. What is the interest rate risk? How it affects the prices of long versus short-term maturities

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