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look Web App AppleDisneyESPN ork for Bond Yahool M McGraw-Hill Connect Saved Help Save& Exit Submit Check my work Consider two bonds, a 3-year bond paying an annual coupon of 5.90% and a 10-year bond also with an annual coupon of 5.90%. Both currenty sell at a face value of $1,000. Now suppose interest rates rise to 9%. a. What is the new price of the 3-year bonds? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Bond price esb. What is the new price of the 10-year bonds? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Bond price c. Which bonds are more sensitive to a change in interest rates? Long-term bonds Prev 7 of 8 NextExplanation / Answer
A)Interest :1000 *5.9% = 59
Price : [PVA 9%,3 * Interest ] + [PVF 9%,3 * Face value]
= [2.53129*59 ]+ [.77218*1000]
= 149.35+ 772.18
=$ 921.53
b)Bond price : [PVA 9%,10*Interest] +[PVF9%,10*Face value]
=[6.41766*59 ]+ [.42241*1000]
= 378.64+ 422.41
= 801.05
c)Long term bonds are more sensitive to Interest rate change.
**Find present value factor and annuity factor from there respectively at 9%
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