you own a bond that pays $120 in annual interest, with a $1000 par value. It matures in 20 years. The market's required yield to maturity on a comparable-risk bond is 10 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 14 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 5 years instead of 20 years and recalculate your answers in parts a and b.

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

Homework: Homework 7 Question 10, P9-18 (similar to) Part 10 HW Score: 00 of 120 points O Points: 0 of 10 Save Related to Checkpoint (Bond valuation relationships) You own a bond that pays $120 naurust with a $1.000 para mas in 20 years. The modelity on a cum bend is 10 percent Calculate the value of the bond b. How does the valoo change the yeld te maturity on a comparable-cakbond (l) increases to 14 percent or decreases parcerit? c. Explain the implication of your answers in part as they relate to restrick premium bonds and discount bands d. At the band maturo in 5 years stead of 20 years and recalculate your awers to parts and . Explain the implicades of your answers in part as they relate to terkembands and discount bonds