Consider three bonds with 5.90% coupon rates, all making annual coupon payments and all selling at...

50.1K

Verified Solution

Question

Finance

Consider three bonds with 5.90% coupon rates, all making annualcoupon payments and all selling at face value. The short-term bondhas a maturity of 4 years, the intermediate-term bond has amaturity of 8 years, and the long-term bond has a maturity of 30years.
a. What will be the price of the 4-year bond ifits yield increases to 6.90%? (Do not round intermediatecalculations. Round your answers to 2 decimal places.)
b. What will be the price of the 8-year bond ifits yield increases to 6.90%? (Do not round intermediatecalculations. Round your answers to 2 decimal places.)
c. What will be the price of the 30-year bondif its yield increases to 6.90%? (Do not round intermediatecalculations. Round your answers to 2 decimal places.)
d. What will be the price of the 4-year bond ifits yield decreases to 4.90%? (Do not round intermediatecalculations. Round your answers to 2 decimal places.)
e. What will be the price of the 8-year bond ifits yield decreases to 4.90%? (Do not round intermediatecalculations. Round your answers to 2 decimal places.)
f. What will be the price of the 30-year bondif its yield decreases to 4.90%? (Do not round intermediatecalculations. Round your answers to 2 decimal places.)
g. Comparing your answers to parts (a), (b),and (c), are long-term bonds more or less affected than short-termbonds by a rise in interest rates?
More affected
Less affected
h. Comparing your answers to parts (d), (e),and (f), are long-term bonds more or less affected than short-termbonds by a decline in interest rates?
More affected
Less affected

Answer & Explanation Solved by verified expert

3.8 Ratings (593 Votes)

SEE THE See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

Consider three bonds with 5.90% coupon rates, all making annualcoupon payments and all selling at face value. The short-term bondhas a maturity of 4 years, the intermediate-term bond has amaturity of 8 years, and the long-term bond has a maturity of 30years.a. What will be the price of the 4-year bond ifits yield increases to 6.90%? (Do not round intermediatecalculations. Round your answers to 2 decimal places.)b. What will be the price of the 8-year bond ifits yield increases to 6.90%? (Do not round intermediatecalculations. Round your answers to 2 decimal places.)c. What will be the price of the 30-year bondif its yield increases to 6.90%? (Do not round intermediatecalculations. Round your answers to 2 decimal places.)d. What will be the price of the 4-year bond ifits yield decreases to 4.90%? (Do not round intermediatecalculations. Round your answers to 2 decimal places.)e. What will be the price of the 8-year bond ifits yield decreases to 4.90%? (Do not round intermediatecalculations. Round your answers to 2 decimal places.)f. What will be the price of the 30-year bondif its yield decreases to 4.90%? (Do not round intermediatecalculations. Round your answers to 2 decimal places.)g. Comparing your answers to parts (a), (b),and (c), are long-term bonds more or less affected than short-termbonds by a rise in interest rates?More affectedLess affectedh. Comparing your answers to parts (d), (e),and (f), are long-term bonds more or less affected than short-termbonds by a decline in interest rates?More affectedLess affected