Bond Valuation - You are examining three bonds with a par value of $ 1,000 (you receive $1,000 at maturity) and are concerned with what would happen to their market value if interest Rates (or the market discount rate) changed. The three bonds are: • Bond A — 3 years left to maturity that pays 10% per year compounded semiannually • Bond B — 7 years left to maturity that pays 10% per year compounded semiannually • Bond C — 20 years lest to maturity that pays 10% per year compounded semiannually What would be the value of the bonds if the market discount rate were : A. 10% per year compounded semiannually? B. 4% per year compounded semiannually? C. 16% per year compounded semiannually? D. What observations can you make about these results?
Rates (or the market discount rate) changed. The three bonds are:
• Bond A — 3 years left to maturity that pays 10% per year compounded semiannually
• Bond B — 7 years left to maturity that pays 10% per year compounded semiannually
• Bond C — 20 years lest to maturity that pays 10% per year compounded semiannually
What would be the value of the bonds if the market discount rate were :
A. 10% per year compounded semiannually?
B. 4% per year compounded semiannually?
C. 16% per year compounded semiannually?
D. What observations can you make about these results?
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