Parker Hannifin has two bonds that pay interest annually, and both have $1,000 par values. The first is a 3% coupon bond with 20 years of remaining life until maturity (the 20-year bond). The second is a 9% coupon bond with 2 years of remaining life until maturity (the 2-year bond). The yield curve is currently flat, and yields-to-maturity are currently 5% for all Parker Hannifin bonds.

a. What is the value of the 20-year bond at current yields?

b.What is the value of the 2-year bond at current yields?

c.If yields increase 2.5% (from 5%) today suddenly, what is the new value of the 20-year bond at this new yield?

d.What is the new value of the 2-year bond at this new yield?

e.Two years from now, what will the value of the 20-year bond be if yields dont change (and remain at 5%)?

f.Two years from now (in the moment before the 2-year bond matures), what will the value of the 2-year bond be if yields dont change (and reman at 5%)?

g.What yield-to-maturity will cause the value of the 20-year bond to be exactly its par value?

h.Which bond has more interest rate risk? The 2-year bond or The 20-year bond