A $$1,000$ bond has a coupon of $5$ percent and matures after $8$ years. Assume that the bond pays interest annually.

If interest rates increase $100$ basis points $($that is$,$ from $6$ percent to $7$ percent$),$ what are the new prices of both bonds assuming annual compounding? Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar.

Bond part a : $

Bond part b : $

Calculate the percentage change in the price of each bond. Round your answers to one decimal place. Enter your answers as a positive value.

Bond part a :

$-$Select$-($increase or decrease$)$

of

$\%$

Bond part b :

$-$Select$-($increase or decrease$)$

of

$\%$

Interest Factors for the Present Value of One Dollar

TimePeriod$($e$.$g$.,$year$)12456101114151617181\%2\%105\%798\%0\mathrm{.}9900\mathrm{.}9800\mathrm{.}9710\mathrm{.}9620\mathrm{.}9520\mathrm{.}9430\mathrm{.}9350\mathrm{.}9261\mathrm{.}9701\mathrm{.}9421\mathrm{.}9131\mathrm{.}8861\mathrm{.}8591\mathrm{.}8331\mathrm{.}8081\mathrm{.}783$Interest Factors for the Present Value of an Annuity of One Dollar$3\%8566$ g $162210\mathrm{.}3689\mathrm{.}7879\mathrm{.}2538\mathrm{.}7608\mathrm{.}3067\mathrm{.}8877\mathrm{.}4997\mathrm{.}1391211\mathrm{.}25510\mathrm{.}5759\mathrm{.}9549\mathrm{.}3858\mathrm{.}8638\mathrm{.}3847\mathrm{.}9437\mathrm{.}5361312\mathrm{.}13411\mathrm{.}34810\mathrm{.}6359\mathrm{.}9869\mathrm{.}3948\mathrm{.}5348\mathrm{.}3587\mathrm{.}904405\mathrm{.}7955\mathrm{.}6015\mathrm{.}4175\mathrm{.}2425\mathrm{.}0764\mathrm{.}9174\mathrm{.}7664\mathrm{.}6236\mathrm{.}7286\mathrm{.}4726\mathrm{.}2306\mathrm{.}0025\mathrm{.}7865\mathrm{.}5825\mathrm{.}3895\mathrm{.}206$Z$6527\mathrm{.}3257\mathrm{.}0206\mathrm{.}7336\mathrm{.}4636\mathrm{.}2105\mathrm{.}9715\mathrm{.}747599\mathrm{.}4718\mathrm{.}9838\mathrm{.}5308\mathrm{.}1117\mathrm{.}7227\mathrm{.}3607\mathrm{.}02499\%10\%12\%14\%16\%18\%20\%24\%28\%32\%36\%0\mathrm{.}9170\mathrm{.}9090\mathrm{.}8930\mathrm{.}8770\mathrm{.}8620\mathrm{.}8470\mathrm{.}8330\mathrm{.}8060\mathrm{.}7810\mathrm{.}7580\mathrm{.}7351\mathrm{.}7591\mathrm{.}7361\mathrm{.}6901\mathrm{.}6471\mathrm{.}6051\mathrm{.}5661\mathrm{.}5281\mathrm{.}4571\mathrm{.}3921\mathrm{.}3321\mathrm{.}2762\mathrm{.}5312\mathrm{.}4872\mathrm{.}4022\mathrm{.}3222\mathrm{.}2462\mathrm{.}1742\mathrm{.}1061\mathrm{.}9811\mathrm{.}8681\mathrm{.}7661\mathrm{.}67414\mathrm{.}71813\mathrm{.}57812\mathrm{.}56111\mathrm{.}65210\mathrm{.}83810\mathrm{.}1069\mathrm{.}4478\mathrm{.}85115\mathrm{.}56214\mathrm{.}29213\mathrm{.}16612\mathrm{.}16611\mathrm{.}27410\mathrm{.}4779\mathrm{.}7639\mathrm{.}12216\mathrm{.}39814\mathrm{.}99213\mathrm{.}75412\mathrm{.}65911\mathrm{.}69010\mathrm{.}82810\mathrm{.}0599\mathrm{.}372$Z$1086802651562475985575$g $53284$A $94646074303403135663\mathrm{.}18428682603$b$\mathrm{.}802$ A $67104\mathrm{.}4864\mathrm{.}3554\mathrm{.}1115\mathrm{.}0334\mathrm{.}8684\mathrm{.}5645\mathrm{.}5355\mathrm{.}3354\mathrm{.}9683\mathrm{.}8893\mathrm{.}685$ B$,4983\mathrm{.}3263\mathrm{.}0202\mathrm{.}7592\mathrm{.}5342\mathrm{.}3$gg$4.2884.0393.8123.6053.2422.9372.6782.4554.6394.3444.0783.8373.4213.0762.7862.5405.3286.4186.1455.6504.9465.2164.6074.3034.0313.5663.1844.8334.4944.1933.6823.2692.9302.6506.8056.4955.9885.4535.0294.6564.3273.7763.3352.9782.6837.1616.8146.1945.6605.1974.7934.4393.8513.3873.0132.7087.4877.1036.4245.8425.3424.91045333.9123.4273.0402.7277.7867.3676.6286.0025.4685.0084.6113.9623.4593.0612.7408.0607.6066.8116.1425.5755.0924.6754.0013.4833.0762.7508.3127.8246.9746.2655.6695.1624.730 There are 3 Steps involved in it Step: 1 Get Instant Access to Expert-Tailored Solutions See step-by-step solutions with expert insights and AI powered tools for academic success Step: 2 Step: 3 Ace Your Homework with AI Get the answers you need in no time with our AI-driven, step-by-step assistance Get Started Recommended Textbook for International Finance Transactions Policy And Regulation Authors: Hal Scott, Anna Gelpern 20th Edition 1609303164, 978-1609303167 More Books Students also viewed these Finance questions Question ★★★★★ Explain why investors who have diversified their portfolios will determine the price and, consequently, the expected return on an asset. 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