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Problem 6 - 1 9 Interest Rate Risk ( LO 3 ) Consider three bonds with 5 . 0 0 % coupon rates, all making
Problem Interest Rate Risk LO Consider three bonds with coupon rates, all making annual coupon payments and all selling at face value. The shortterm bond has a maturity of years, the intermediateterm bond has a maturity of years, and the longterm bond has a maturity of years. a What will be the price of the year bond if its yield increases to Do not round intermediate calculations. Round your answer to decimal places. b What will be the price of the year bond if its yield increases to Do not round intermediate calculations. Round your answer to decimal places. c What will be the price of the year bond if its yield increases to Do not round intermediate calculations. Round your answer to decimal places. d What will be the price of the year bond if its yield decreases to Do not round intermediate calculations. Round your answer to decimal places. e What will be the price of the year bond if its yield decreases to Do not round intermediate calculations. Round your answer to decimal places. f What will be the price of the year bond if its yield decreases to Do not round intermediate calculations. Round your answer to decimal places. g Comparing your answers to parts ab and c are longterm bonds more or less affected than shortterm bonds by a rise in interest rates? h Comparing your answers to parts de and f are longterm bonds more or less affected than shortterm bonds by a decline in interest rates?
Problem Interest Rate Risk LO
Consider three bonds with coupon rates, all making annual coupon payments and all selling at face value. The shortterm bond
has a maturity of years, the intermediateterm bond has a maturity of years, and the longterm bond has a maturity of years.
a What will be the price of the year bond if its yield increases to Do not round intermediate calculations. Round your
answer to decimal places.
b What will be the price of the year bond if its yield increases to Do not round intermediate calculations. Round your
answer to decimal places.
c What will be the price of the year bond if its yield increases to Do not round intermediate calculations. Round your
answer to decimal places.
d What will be the price of the year bond if its yield decreases to Do not round intermediate calculations. Round your
answer to decimal places.
e What will be the price of the year bond if its yield decreases to Do not round intermediate calculations. Round your
answer to decimal places.
f What will be the price of the year bond if its yield decreases to Do not round intermediate calculations. Round your
answer to decimal places.
g Comparing your answers to parts ab and c are longterm bonds more or less affected than shortterm bonds by a rise in
interest rates?
h Comparing your answers to parts de and f are longterm bonds more or less affected than shortterm bonds by a decline in
interest rates?
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