Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

has a mer three bonds with 6.70% coupon rates, all making annual coupon payments and all selling at face value. The short-term bond has a

image text in transcribed
image text in transcribed
has a mer three bonds with 6.70% 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 7.70% ? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. b. What will be the price of the 8 -year bond if its yieid increases to 7.70% ? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. c. What will be the price of the 30 -year bond if its yield increases to 7.70% ? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. d. What will be the price of the 4-year bond if its yield decreases to 5.70% ? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. e. What will be the price of the 8 -year bond if its yield decreases to 5.70% ? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. f. What will be the price of the 30 -year bond if its yield decreases to 5.70% ? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. 9. Comparing your answers to parts (a), (b), and (c), are long-term bonds more or less affected than short-term bonds by a rise in interest rates? h. Comparing your answers to parts (d), (e), and (f), are long-term bonds more or less affected than short-term bonds by a decline in interest rates? c. What will be the price of the 30 -year bond if its yield increases to 7.70% ? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. d. What will be the price of the 4-year bond if its yield decreases to 5.70% ? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. e. What will be the price of the 8 -year bond if its yield decreases to 5.70% ? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. f. What will be the price of the 30 -year bond if its yield decreases to 5.70% ? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. g. Comparing your answers to parts (a), (b), and (c), are long-term bonds more or less affected than short-term bonds by a rise in interest rates? h. Comparing your answers to parts (d), (e), and ( f ), are long-term bonds more or less affected than short-term bonds by a decline in interest rates

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Yield Curve And Financial Risk Premia Implications For Monetary Policy

Authors: Felix Geiger

1st Edition

3642215742, 3642215750, 9783642215742, 9783642215759

More Books

Students also viewed these Finance questions