You own a bond that pays $120 in annual interest, with a $1,000 par value. It matures in 15 years. The markets required yield to maturity on a comparable risk bond is 11 percent.

a. Calculate the value of the bond.

b. How does the value change if the yield to maturity on a comparable-risk bond increases to 14 percent or decreases to 7 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 4 years instead of 15 years and recalculate your answers in part 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.

(Yields to maturity) A bonds market price is $825. It has a $1,000 par value, will mature in 10 years and has a coupon interest rate of 12 percent annual interest, but makes its interest payments semiannually, what is the bonds yield to maturity? What happens to the bonds yield to maturity if the bond matures in 20 years? What if it matures in 5 years?