Assume the interest rate in the market (yield to maturity) goes down to 8 percen

Question

Assume the interest rate in the market (yield to maturity) goes down to 8 percent for the 10 percent bonds. Using column 2, indicate what the bond price will be with a 1-year, a 15-year, and a 25-year time period. (Round "PV Factor" to 3 decimal places, intermediate calculations and final answers to 2 decimal places.

1 year Maturity, Bond price?

15 year maturity, Bond price?

25 year maturity, Bond price?

Assume the interest rate in the market (yield to maturity) goes up to 12 percent for the 10 percent bonds. Using column 3, indicate what the bond price will be with a 1-year, a 15-year, and a 25-year period. (Round "PV Factor" to 3 decimal places, intermediate calculations and final answers to 2 decimal places.

1 year Maturity, Bond price?

15 year maturity, Bond price?

25 year maturity, Bond price?

Assume the interest rate in the market (yield to maturity) goes down to 8 percent for the 10 percent bonds. If interest rates in the market are going down, which bond would you choose to own?

Short term bond or long term bond?

Assume the interest rate in the market (yield to maturity) goes up to 12 percent for the 10 percent bonds. If interest rates in the market are going up, which bond would you choose to own?

Short term bond or long term bond?

Assume the interest rate in the market (yield to maturity) goes down to 8 percent for the 10 percent bonds. Using column 2, indicate what the bond price will be with a 1-year, a 15-year, and a 25-year time period. (Round "PV Factor" to 3 decimal places, intermediate calculations and final answers to 2 decimal places.

1 year Maturity, Bond price?

15 year maturity, Bond price?

25 year maturity, Bond price?

Explanation / Answer

a)

1 year maturity...bond price = 1018.60

15year maturity ...bondprice = 1170.90

25 yearmaturity ...bondprice = 1213.50

b)

1 year ....bondprice = 982.30

15year.....bond price =864.11

25 year bondprice = 843.30

c) longest term bond

d)shortest termbond

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