Bond valuation) You own a bond that pays $110 in annual interest, with a $1,000 par value. It matures in 15 years. Your required rate of return is 10 percent - Calculate the value of the bond. . How does the value change if your required rate of return (1) increases to 15 percent or (2) decreases to 7 percent? - Explain the implications of your answers in part (b) as they relate to interest rate risk, premium bonds, and discount bonds . Assume that the bond matures in 5 years instead of 15 years. Recompute your answers in part (b) . Explain the implications of your answers in part (d) as they relate to interest rate risk, premium bonds, and discount bonds 1. If your required rate of return is 10 percent, what is the value of the bond? (Round to the nearest cent.) o. What is the value of the bond if your required rate of return increases to 15 percent? (Round to the nearest cent.) what is the value of the bond if your required rate of return decreases to 7 percent? 5 (Round to the nearest cent.) c. Based on the answers in part (b), a decrease in interest rates (the required sale of retum) will cause the value of a bond to value to (select from the drop-down menus) V by contrast, an increase in interest rates will cause the Also, based on the answers in part (b). If the required rate of return (current interest rate) (Select from the drop down menus) 1 Equals the coupon interest rate, the bond will sell at 2. Exceeds the bond's coupon rate, the bond will sell at 3. is less than the bond's coupon rate, the bond will sell at d. Assume the bond matures in 5 years instead of 15 years. What is the value of the bond if your required rate of return is 10 percent? y iciaie U IereSt lale nsK d. Assume the bond matures in 5 years instead of 15 years. What is the value of the bond if your required rate of return is 10 percent? (Round to the nearest cent.) What is the value of the bond if your required rate of return increases to 15 percent? $ (Round to the nearest cent.) What is the value of the bond if your required rate of return decreases to 7 percent? (Round to the nearest cent) greater same What is the value of the bond if your required rate of return decreases to 7 percent? $ (Round to the nearest cent.) smaller interest rate risk than one owning a short-term bond e. From the findings in part (d), we can conclude that a bondholder owning a long-term bond is exposed to menu.) (Bond valuation) You own a bond that pays $110 in annual interest, with a $1,000 par value. It matures in 15 years. Your required rate of return is 10 percent a. Calculate the value of the bond. b. How does the value change if your required rate of return (1) increases to 15 percent or (2) decreases to 7 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 15 years. Recompute your answers in part (b). e. Explain the implications of your answers in part (d) as they relate to interest rate risk, premium bonds, and discount bonds a. If your required rate of return is 10 percent, what is the value of the bond? $ (Round to the nearest cent.) b. What is the value of the bond if your required rate of return increases to 15 percent? $ (Round to the nearest cent.) What is the value of the bond if your required rate of return decreases to 7 percent? $ (Round to the nearest cent.) by contrast, an increase in interest rates will cause the value to c. Based on the answers in part (b), a decrease in interest rates (the required rate of retum) will cause the value of a bond to (Select from the drop-down menus.) Also, based on the answers in part(b) the required rate of retum (current interest rates (Select from the drop-d 1. Equals the coupon interest rate the bond will sell at 2. Exceeds the bonds coupon rate the bond will sel at 3. is less than the band's coupon rate, the bond will sel at 3. Is less than the bond's coupon rate, the bond will sell at d. Assume the bond matures in 5 years instead of 15 years. What is the value of the bond if your required rate of return is 10 percent? $ (Round to the nearest cent.) What is the value of the bond if your required rate of return increases to 15 percent? $ (Round to the nearest cent.) What is the value of the bond if your required rate of return decreases to 7 percent? $ (Round to the nearest cent.) . From the findings in part (d), we can conclude that a bondholder owning a long-term bond is exposed to ferest rate risk than one owning a short-term bond (Select from the drop down menu) nter your answer in each of the answer boxes