Question
I already answered the question below, can you check it and help me put it into different wording? What would happen to the value of
I already answered the question below, can you check it and help me put it into different wording?
What would happen to the value of the 10-year bond over time if the return remained as 13%? If it remained at 7%? (Hint: Calculate the value of the bond at different maturities to see what happens to the value as it approaches maturity.)
At 7%, PV value is $1,213.19
At 13%, PV value is $834.72
If the 10-year bond changes the maturity to 15-year and 20-year bond at the same rate 7%, the PV value is going to increase from $1,213.19 to $1,275.88 and $1,320.33.At 13%, the PV value is going to be $804.12 and $787.82.With the same yield to maturity, it shows that both 7% and 13% bond's value moves toward its par value which is $1,000.At 13%, the value is tend to incresae to reach its par value.At 7%, the value is decreasing to reach its par value.
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