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Consider two bonds X and Y. The coupon rates are 10% and the face values are TK. 2000 for both bonds. Bond X has

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Consider two bonds X and Y. The coupon rates are 10% and the face values are TK. 2000 for both bonds. Bond X has 12 years maturity while bond Y has 10 years to maturity. i. ii. iii. iv. What are the prices of the two bonds if the market interest rate for both bonds is 10% If the market interest rate increases to 14%, what will be the prices of the two bonds? If the market interest rate decreases to 9%, what will be the prices of the two bonds? Describe the effects of the changes of market interest rate on the values of the two bonds.

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PV C1r1 C1r2 C1rn F1rn Where PV Present Value C Coupon payment r Discount rate yield to maturity n Number of periods years to maturity F Face value i ... blur-text-image

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