7 11 Bond valuation Kyser Public Utilities issued a bond with a 1 000 par...
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7 11 Bond valuation Kyser Public Utilities issued a bond with a 1 000 par v that pays 30 in annual interest It matures in 20 years Your required rate of return value is 4 percent a Calculate the value of the bond b How does the value change if your required rate of return 1 increases to 7 percent or 2 decreases to 2 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 10 years instead of 20 years Recompute answers in part b your e Explain the implications of your answers in part d as they relate to interest rate risk premium bonds and discount bonds
7 11 Bond valuation Kyser Public Utilities issued a bond with a 1 000 par v that pays 30 in annual interest It matures in 20 years Your required rate of return value is 4 percent a Calculate the value of the bond b How does the value change if your required rate of return 1 increases to 7 percent or 2 decreases to 2 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 10 years instead of 20 years Recompute answers in part b your e Explain the implications of your answers in part d as they relate to interest rate risk premium bonds and discount bonds
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