Consider three bonds with 5.40% coupon rates, all making annual coupon payments and all selling at face value. The short-term bond has a maturity of 4 years, the intermediate-term bond has a maturity of 8 years, and the long-term bond has a maturity of 30 years.
a.
What will be the price of the 4-year bond if its yield increases to 6.40%?
(Do not rou
nd intermediate calculations. Round your answer to 2 decimal places.)
b.
What will be the price of the 8-year bond if its yield increases to 6.40%?
(Do not rou
nd intermediate calculations. Round your answer to 2 decimal places.)
c.
What will be the price of the 30-year bond if its yield increases to 6.40%?
(Do not rou
nd intermediate calculations. Round your answer to 2 decimal places.)
d.
What will be the price of the 4-year bond if its yield decreases to 4.40%?
(Do not round interm
ediate calculations. Round your answer to 2 decimal places.)
e.
What will be the price of the 8-year bond if its yield decreases to 4.40%?
(Do not round interme
diate calculations. Round your answer to 2 decimal places.)
f.
What will be the price of the 30-year bond if its yield decreases to 4.40%?
(Do not round intermediate calculations. Round your answer to 2 decimal places.)
g.
Comparing your answers to parts (a), (b), and (c), are long-term bonds more or less affected than short-term bonds by a rise in interest rates?
h.
Comparing your answers to parts (d), (e), and (f), are long-term bonds more or less affected than short-term bonds by a decline in interest rates?