Refer to Table 10-2.

10% interest payment various times to maturity

time period in yrs to maturity | bond price with 8% yeild to maturity | bond price with 12% yeild to maturity

0 |1,000 |1000

1 |1018.52| 982.14

5 |1079.85 | 927.90

10| 1134.20 | 887.00

15 | 1171.19 | 863.78

20| 1196.36 | 850.61

25| 1213.50| 843.14

30| 1225.16 | 838.90

a. Assume the interest rate in the market (yield to maturity) goes down to 8 percent for the 10 percent bonds. Using column 2, indicate what the bond price will be with a 5-year, a 15-year, and a 25-year time period.

maturirty bond price

5 year _________

15 year ________

25 year __________

b. Assume the interest rate in the market (yield to maturity) goes up to 12 percent for the 10 percent bonds. Using column 3, indicate what the bond price will be with a 5-year, a 15-year, and a 25-year period.

maturirty bond price

5 year _________

15 year ________

25 year __________

c. Assume the interest rate in the market (yield to maturity) goes down to 8 percent for the 10 percent bonds. If interest rates in the market are going down, which bond would you choose to own?

multiple choice 1

• 5 Years

• 15 Years

• 25 Years

d. Assume the interest rate in the market (yield to maturity) goes up to 12 percent for the 10 percent bonds. If interest rates in the market are going up, which bond would you choose to own?

multiple choice 2

• 5 Years

• 15 Years

• 25 Years