You own a bond that pays $100 in annual interest, with a $1,000 par value.It matures in 15 years.The market's required yield to maturity on a comparable risk bond is 12 percent.

a. Calculate the value of the bond.

b. How does the value change if the yield to maturity on a comparable risk bond (i) increases to 15 percent or (ii) decreases to 8 percent?

c. Explain the implications of your answers in part (b) as they relate to interest rate risk, premium bonds, and discount bonds.

d. Assume that the bond matures in five years instead of 15 years and re-calculate your answers in part (b).

e. Explain the implications of your answers in part (d) as they relate to interest rate risk, premium bonds, and discount bonds.

Please show all the formulas used and details of your work