Question

Consider three bonds with 6.2% coupon rates, all selling at face value. The short-term bond has a maturity of 4 years, the Intermediate-term bond has maturity 8 years, and the long-term bond has maturity 30 years. a. What will be the price of each bond of their ylelds Increase to 7.2%? (Do not round Intermediate calculations. Round your answers to 2 decimal places.) Bond price 4 Years $0 8 Years $0 30 Years $ b. What will be the price of each bond if thelr yields decrease to 5.2%? (Do not round Intermediate calculations. Round your answers to 2 decimal places.) 4 Years 8 Years 30 Years Bond price 4 years so years so years

Answer 1

B Bond 1 6.20% C Bond 2 6.20% А 1 2 Coupon Rate 3 Years to Maturity 4. Par Value 5 6 YTM 7 Price D E Bond 3 6.20% 30 years $1,000 $1,000 $1,000 7.20% $966.28 7.20% $940.75 7.20% $878.36 8 9 YTM 10 Price 11 5.20% $1,035.30 5.20% 5.20% $1,064.11 $1,150.28 12

D years 1 Bond 1 Bond 2 Bond 3 2 Coupon Rate 0.062 0.062 0.062 3 Years to Maturity 4 30 4. Par Value 1000 1000 1000 5 6 YTM 0.072 0.072 0.072 7 Price --PV(B6,B$3,B$2*B$4,B$4) --PV(C6, C$3,C$2*C$4,C$4) --PV(D6,D$3,D$2*D$4,D$4) 8 9 YTM 10 Price 11 0.052 0.052 0.052 --PV(B9,B$3,B$2*B$4,B$4) --PV(C9,C$3,C$2*C$4,C$4) --PV(D9,D$3,D$2*D$4,D$4) 12 13