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Pacific Homecare has three bond issues outstanding. All three bonds pay $100 in annual interest plus $1,000 at maturity. Bond S has a maturity of
Pacific Homecare has three bond issues outstanding. All three bonds pay $100 in annual interest plus $1,000 at maturity. Bond S has a maturity of 5 years, Bond M has a 15-year maturity, and Bond L matures in 30 years. a. What is the value of these bonds when the required interest rate is 5 percent, 10 percent, and 15 percent? b. Why is the price of Bond L more sensitive to interest rate changes than the price of Bond S?
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