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(Bond valuation) You own a bond that pays $120 in annual interest, with a $1,000...

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(Bond valuation) You own a bond that pays $120 in annual interest, with a $1,000 par value. It matures in 20 years. Your required rate of retum is 11 percent. a. Calculate the value of the bond. b. How does the value change if your required rate of retum (1) increases to 15 percent or (2) decreases to 6 percent? c. Explain tho 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 3 years instead of 20 years. Recompute your answers in part (b). e. Explain the implications of your answers in part (d) as they relate to interest rate risk, premium bonds, and discount bonds. a. If your required rate of retum is 11 percent, what is the value of the bond? (Round to the nearest cent.)

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