PLEASE COMPLETE PART A AND B FOR AN UPVOTE

part A

part B

please show all your work and round to the decimals labeled in the questions.

Consider two bonds, a 3-year bond paying an annual coupon of 5.40% and a 10 -year bond also with an annual coupon of 5.40%. Both currently sell at a face value of $1,000. Now suppose interest rates rise to 10%. a. What is the new price of the 3 -year bonds? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. b. What is the new price of the 10 -year bonds? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. c. Which bonds are more sensitive to a change in interest rates? Long-term bonds Short-term bonds a. Many years ago, Castles in the Sand Incorporated issued bonds at face value at a yield to maturity of 8%. Now, with 7 years left until the maturity of the bonds, the company has run into hard times and the yleld to maturity on the bonds has increased to 12%. What is now the price of the bond? (Assume semiannual coupon payments.) Note: Do not round intermediate calculations. Round your answer to 2 decimal places. b. Suppose that investors believe that Castles can make good on the promised coupon payments but that the company will go bankrupt when the bond matures and the principal comes due. The expectation is that investors will receive only 82% of face value at maturity. If they buy the bond today, what yield to maturity do they expect to receive? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places