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Q14. A bond will pay an annual 7.5 per cent coupon until maturity (the next coupon will be paid in one year). The bond matures

Q14. A bond will pay an annual 7.5 per cent coupon until maturity (the next coupon will be paid in one year). The bond matures in six years.

(a) What will be the market price of the bond if yields to maturity for this risk class fall to 6.5 per cent?

(b) What will be the market price of the bond if yields to maturity for this risk class rise to 8.5 per cent?

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