Bond Evaluation Part B - Sensitivity to Interest Rate *Calculate the market prices under each combined conditions and answer question 1 and 2 (yellow cells) Investors' Required Rate of Return (Interest Rate) coupon maturity 5.00% 6.00% 7.00% 8.00% 100.00 7.00% 30 ($304.23) ($303.12) ($302.02) ($300.94) 100.00 7.00% 15 ($201.94) ($201.36) ($200.78) ($200.20) 100.00 7.00% 7 ($147.39) ($147.08) ($146.78) ($146.47) 1) As the required yield on each bond rises (from 5% to 9%), what happens to the value of the bond? $ $ par 9.00% ($299.87) ($199.64) ($146.18) 2) When interest rates change, which bond is affected more, long-term bonds or short-term bonds? Why? +
Bond Evaluation Part B - Sensitivity to Interest Rate *Calculate the market prices under each combined conditions and answer question 1 and 2 (yellow cells) Investors' Required Rate of Return (Interest Rate) coupon maturity 5.00% 6.00% 7.00% 8.00% 100.00 7.00% 30 ($304.23) ($303.12) ($302.02) ($300.94) 100.00 7.00% 15 ($201.94) ($201.36) ($200.78) ($200.20) 100.00 7.00% 7 ($147.39) ($147.08) ($146.78) ($146.47) 1) As the required yield on each bond rises (from 5% to 9%), what happens to the value of the bond? $ $ par 9.00% ($299.87) ($199.64) ($146.18) 2) When interest rates change, which bond is affected more, long-term bonds or short-term bonds? Why? +
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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Transcribed Image Text:Bond Evaluation Part B - Sensitivity to Interest Rate
*Calculate the market prices under each combined conditions and answer question 1 and 2 (yellow cells)
Investors' Required Rate of Return (Interest Rate)
6.00%
7.00%
8.00%
($304.23)
($303.12)
($302.02)
($300.94)
($201.94)
($201.36)
($200.78) ($200.20)
($147.39)
($147.08)
($146.78) ($146.47)
1) As the required yield on each bond rises (from 5% to 9%), what happens to the value of the bond?
$
$
par
coupon maturity 5.00%
7.00%
30
15
7
100.00
100.00
7.00%
100.00 7.00%
9.00%
($299.87)
($199.64)
($146.18)
2) When interest rates change, which bond is affected more, long-term bonds or short-term bonds? Why?
4
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