ear bond paying an annual coupon of 6.80% and a 10-year bond also with an annual coupon of 6.80%. Both e of $1,000. Now suppose interest rates rise to 11%. e of the 3-year bonds? intermediate calculations. Round your answer to 2 decimal places. e of the 10-year bonds? intermediate calculations. Round your answer to 2 decimal places. e sensitive to a change in interest rates? onds onds

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
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Consider two bonds, a 3-year bond paying an annual coupon of 6.80% and a 10-year bond also with an annual coupon of 6.80%. Both
currently sell at a face value of $1,000. Now suppose interest rates rise to 11%.
a. What is the new price of the 3-year bonds?
Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
Bond price
b. What is the new price of the 10-year bonds?
Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
Bond price
c. Which bonds are more sensitive to a change in interest rates?
O Long-term bonds
O Short-term bonds
Transcribed Image Text:Consider two bonds, a 3-year bond paying an annual coupon of 6.80% and a 10-year bond also with an annual coupon of 6.80%. Both currently sell at a face value of $1,000. Now suppose interest rates rise to 11%. a. What is the new price of the 3-year bonds? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Bond price b. What is the new price of the 10-year bonds? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Bond price c. Which bonds are more sensitive to a change in interest rates? O Long-term bonds O Short-term bonds
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