You own a bond that pays $100 in annualinterest, with a $1,000 par value. It matures in 15 years. Themarket's required yield to maturity on acomparable-risk bond is 12 percent.

a.Calculate the value of the bond.

b.How does the value change if the yield to maturity on acomparable-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 tointerest-rate risk, premiumbonds, and discount bonds.

d.Assume that the bond matures in 5 years instead of 15 years and recalculate your answers in parts a and b.

e.Explain the implications of your answers in part d as they relate tointerest-rate risk, premiumbonds, and discount bonds.