) (Bond valuation relationships) Arizona Public Utilities issued a bond that pays $70 in interest, with a $1,000 par value and matures in 25 years The markers required yield to maturity on a comparable risk bond is 8 percent (Round to the nearest cent ) For questions with two answer options (e g increase decrease) choose the best answer and write it in the answer block Question Answer a What is the value of the bond if the markers required yield to maturity on a comparable risk bond is 8 percent $ b What is the value of the bond if the markers required yield to maturity on a comparable risk bond increases to 11 percent $ c What is the value of the bond if the market's required yield to maturity on a comparable risk bond decreases to 7 percent $ d The change in the value of a bond caused by changing interest rates is called interest rate risk Based on the answer in parts b and c, a decrease in interest rates (the yield to maturity) will cause the value of a bond to (increase decrease) By contrast in interest rates will cause the value to (increase decrease) Also, based on the answers in part b, if the yield to maturity (current interest rate) equals the coupon interest rate, the bond will sell at (par face value) exceeds the bond's coupon rate, the bond will sell at a (discount premium) and is less than the bond's coupon rate, the bond will sell at a (discount premium) e Assume the bond matures in 5 years instead of 25 years, what is the value of the bond if the yield to maturity on a comparable risk bond is 8 percent $ 960 07 Assume the bond matures in 5 years instead of 25 years, what is the value of the bond if the yield to maturity on a comparable risk bond is 11 percent $ f Assume the bond matures in 5 years instead of 25 years, what is the value of the bond if the yield to maturity on a comparable risk bond is 7 percent $ g From the findings in part e, we can conclude that a bondholder owning a long term bond is exposed to (more less) interest rate risk than one owning a short term bond

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). (Bond valuation relationships) Arizona Public Utilities issued a bond that pays $70 in interest, with a $1,000 par value and matures in 25 years.

). (Bond valuation relationships) Arizona Public Utilities issued a bond that pays $70 in interest, with a $1,000 par value and matures in 25 years. The markers required yield to maturity on a comparable-risk bond is 8 percent. (Round to the nearest cent.) For questions with two answer options (e.g. increase/decrease) choose the best answer and write it in the answer block.

Question	Answer
a. What is the value of the bond if the markers required yield to maturity on a comparable-risk bond is 8 percent?	$

b. What is the value of the bond if the markers required yield to maturity on a comparable-risk bond increases to 11 percent?	$

c. What is the value of the bond if the market's required yield to maturity on a comparable-risk bond decreases to 7 percent?	$

d. The change in the value of a bond caused by changing interest rates is called interest-rate risk. Based on the answer: in parts b and c, a decrease in interest rates (the yield to maturity) will cause the value of a bond to (increase/decrease):
By contrast in interest rates will cause the value to (increase/decrease):
Also, based on the answers in part b, if the yield to maturity (current interest rate) equals the coupon interest rate, the bond will sell at (par/face value):
exceeds the bond's coupon rate, the bond will sell at a (discount/premium):
and is less than the bond's coupon rate, the bond will sell at a (discount/premium):

e. Assume the bond matures in 5 years instead of 25 years, what is the value of the bond if the yield to maturity on a comparable-risk bond is 8 percent? $ 960.07 Assume the bond matures in 5 years instead of 25 years, what is the value of the bond if the yield to maturity on a comparable-risk bond is 11 percent?	$

f. Assume the bond matures in 5 years instead of 25 years, what is the value of the bond if the yield to maturity on a comparable-risk bond is 7 percent?	$

g. From the findings in part e, we can conclude that a bondholder owning a long-term bond is exposed to (more/less) interest-rate risk than one owning a short-term bond.