************. Refer to Table 10-2 a. 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 20-year time period. Maturity 1 year 15 year 20 year b. 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 20-year period. Maturity Bond Price 1 year 15 year 20 year Bond Price c. 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?
************. Refer to Table 10-2 a. 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 20-year time period. Maturity 1 year 15 year 20 year b. 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 20-year period. Maturity Bond Price 1 year 15 year 20 year Bond Price c. 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?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Answer question a and b please and thank you
Transcribed Image Text:Table 10-2 Impact of time to maturity on bond prices
Time Period in
Years to Maturity
0
1
5
30
(10% Interest Payment, Various Times to Maturity)
Bond Price with 8%
Yield to Maturity
$1,000.00
1,018.52
1,079.85
1,134.20
1,171.19
1.196.36
1,213.50
1.225.16
Bond Price with 12%
Yield to Maturity
$1,000.00
982.14
927.90
887.00
863.78
850.61
843.14
838.90
Transcribed Image Text:Table 10-2 Impact of time to maturity on bond prices
Time Period in
Years to Maturity
0
1
5
30
(10% Interest Payment, Various Times to Maturity)
Bond Price with 8%
Yield to Maturity
$1,000.00
1,018.52
1,079.85
1,134.20
1,171.19
1.196.36
1,213.50
1.225.16
Bond Price with 12%
Yield to Maturity
$1,000.00
982.14
927.90
887.00
863.78
850.61
843.14
838.90
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