Use the below information to answer the questions below:

Issuer	Price	Coupon %	Maturity	Yield to Maturity %
Microsoft Short		10.00	1 year from today
Microsoft Long		10.00	15 years from today

Interest payments have just been paid. Interest is paid annually and the next interest payment is one year from today. The final interest payment is on the day the bond matures (all bonds have a par value of $1000).

For both Microsofts Short and Long term bonds, calculate the bond prices in dollars under the following three scenarios:

1. When the required interest rate (yield to maturity) is 10 percent?

2. When the required interest rate (yield to maturity) is 5 percent?

3. When the required interest rate (yield to maturity) is 20 percent?

4. Based on the answers above, what can be observed regarding the:

(A) Fluctuation in bonds prices relative to changes in interest rates? For example, when interest rates increase (decrease) what is the impact on bond prices?

(B) Magnitude of the change for the short term bond compared with the long term bond?