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please answer the remaining questions (Related to Checkpoint 9.3) (Bond valuation relationships) You own a bond that pays $110 in annual interest, with a $1,000
please answer the remaining questions
(Related to Checkpoint 9.3) (Bond valuation relationships) You own a bond that pays $110 in annual interest, with a $1,000 par value. It matures in 10 years. The market's required yield to maturity on a comparable-risk bond is 10 percent. a. Calculate the value of the bond. b. How does the value change if the yield to maturity on a comparable-risk bond (i) increases to 15 percent or (ii) decreases to 7 percent? c. Explain the implications of your answers in part b as they relate to interest-rate risk, premium bonds, and discount bonds. d. Assume that the bond matures in 5 years instead of 10 years and recalculate your answers in parts a and b. e. Explain the implications of your answers in part d as they relate to interest-rate risk, premium bonds, and discount bonds. a. What is the value of the bond if the market's required yield to maturity on a comparable-risk bond is 10 percent? $ 1061.45 (Round to the nearest cent.) b. (i) What is the value of the bond if the yield to maturity on a comparable-risk bond increases to 15 percent? $ 799.25 (Round to the nearest cent.) b. (ii) What is the value of the bond if the yield to maturity on a comparable-risk bond decreases to 7 percent? (Round to the nearest cent.)Step by Step Solution
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