In this assignment, you will apply the principles used in calculating the price of a bond.

Instructions: The yield of the 10-year US Treasury bond is 1.20%. It is the risk-free rate.

You work for an investment manager and your boss asks you to calculate the price of a 10-year corporate bond that yields 3.00% more than its risk-free rate and has a face value of $1,000.

The fixed coupon of this corporate bond is 5.00%. Both bonds pay coupons annually.

What is the current price of the corporate bond?

Calculate the price of the bond if its yield increased by 1.00%.

Calculate the price of the bond if its yield decreased by 1.00%.

Please discuss the risk associated with this change in interest rates.