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- value of the...


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- value of the bond is 863.78.


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 5 years instead of 15
years and recalculate your answers in parts a and b.


Jun 02, 2022
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