Question
Bond Par Value Coupon (Annual) Maturity(YRS) A 100,000 12% 5 B 100,000 6% 10 C 100,000 8% 15 Required (a) If interest rates are 10%,
| Bond | Par Value | Coupon (Annual) | Maturity(YRS) |
| A | 100,000 | 12% | 5 |
| B | 100,000 | 6% | 10 |
| C | 100,000 | 8% | 15 |
Required
(a) If interest rates are 10%, what is the current price of each bond?
(b) Interest rates increase to 12%; calculate the new price of each bond.
(c) Interest rates fall to 8%; calculate the new price of each bond.
(d) Estimate which bond is most sensitive to interest rate changes? Explain how the bond characteristics determine the sensitivity of a bonds price to changes in interest rates.
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Shareholder Empowerment A New Era In Corporate Governance
Authors: Maria Goranova, Lori Verstegen Ryan
1st Edition
1137376449,1137373938
