Question
Consider three bonds with 5.20% coupon rates, all making annual coupon payments and all selling at face value. The short-term bond has a maturity of
Consider three bonds with 5.20% coupon rates, all making annual coupon payments and all selling at face value. The short-term bond has a maturity of 4 years, the intermediate-term bond has a maturity of 8 years, and the long-term bond has a maturity of 30 years. a. What will be the price of the 4-year bond if its yield increases to 6.20%? b. What will be the price of the 8-year bond if its yield increases to 6.20%? c. What will be the price of the 30-year bond if its yield increases to 6.20%? d. What will be the price of the 4-year bond if its yield decreases to 4.20%? e. What will be the price of the 8-year bond if its yield decreases to 4.20%? f. What will be the price of the 30-year bond if its yield decreases to 4.20%?
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