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Problem [Assignment 3] Consider the following four bonds: Time to Maturity Required Rate of Return Bond Price Coupon ondPar Value Rate 10% 10% 7 6%
Problem [Assignment 3] Consider the following four bonds: Time to Maturity Required Rate of Return Bond Price Coupon ondPar Value Rate 10% 10% 7 6% (years) 1,000 1,000 1,000 1,000 1,000 10 20 15 7 10% 5% 5% 1,342.38 828.81 Assume that all bonds pay coupons annually A. Determine or calculate the unknown bond parameters in the table above B. Comparing bonds A and B, the price of which bond is more sensitive to changes in the discount rate? That is, if the discount rate were to increase by 1%, which bond price is expected to change more in percentage terms? Why? [No computations are needed, only an explanation in words] C. Similarly to the previous question, comparing bonds C and D, the price of which bond is more sensitive to changes in the discount rate, and why
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