(Bond valuation relationships) Arizona Public Utilities issued a bond that pays $80 in interest, with a $1,000 par value. It matures in 25 years. The market's required yield to maturity on a comparable-risk bond is 6 percent. a. Calculate the value of the bond. b. How does the value change if the market's required yield to maturity on a comparable-risk bond (i) increases to 12 percent or (ii) decreases to 5 percent? c. Explain the implications of your answers in part b as they relate to interest-rate risk, premium bonds, and discount bonds. d. Assume that the bond matures in 5 years instead of 25 years. Recompute your answers in parts a and b. e. Explain the implications of your answers in part d as they relate to interest-rate risk, premium bonds, and discount bonds. 1422.04 noun LU UIE Tearest Cen) c. The change in the value of a bond caused by changing interest rates is called interest-rate risk. Based on the answers in part b, a decrease in interest rates (the yield to maturity) will cause the value of a bond to increase ; by contrast, an increase in interest rates will cause the value to decrease . (Select from the drop-down menus.) 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 exceeds the bond's coupon rate, the bond will sell at a discount ; and is less than the bond's coupon rate, the bond will sell at a premium . (Select from the drop-down menus.) d. 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 6 percent? (Round to the nearest cent.)