Question. 4 (Show calculations+formulas) NO EXCEL

Threw has recently issued two bonds with semi-annual payments of R40. One bond has maturity of 2 years and the other one has a maturity of 10 years. Both bonds currently sell at par, R1,000 with a yield-to-maturity (YTM) of 8 percent.

Required:

4.1. Calculate the price of each bond if the YTM drops to 6 percent. [4]

4.2. Calculate the price of each bond if the YTM rises to 10 percent. [4]

4.3. Comment on the pattern observed as a result of these changes. [2]