A bond trader purchased each of the following bonds at a yield to maturity of 8%. Immediately after she purchased the bonds, interest rates fell to 7%. To show the price sensitivity of each bond to changes in interest rates, fill in the blanks in the following table (do not round intermediate calculations. Round the monetary values to the nearest cent and percentage values to two decimal places.):

Price @ 8% Price @ 7% Pctge. Change 10-year 10% annual coupon (par value is $1,000) $ $ % 10-year zero coupon (par value is $1,000) $ $ % 5-year zero coupon (par value is $1,000) $ $ % 30-year zero coupon (par value is $1,000) $ $ % $100 perpetuity $ $ % Could you use the percentage change as a measure of the bonds interest rate risk? Would you be making any assumptions about the shape of the yield curve if you did this? Might changes in the shape of the yield curve affect changes in the bonds prices in the real world? Discuss how the yield curve might affect a bonds price variability over time.

The percentage change -Select- be used as a measure of the bonds interest rate risk as the shape of the yield curve -Select- . As the shape of the yield curve -Select- , a bonds price -Select- . There is -Select- relationship between interest rates and bond prices.