Problem 6-19 Interest Rate Risk (LO3) Consider three bonds with 5.00% coupon rates, all making annual coupon payments and all selling at face value. The short-term bond has a maturity of 4 years, the intermediate-term bond has a maturity of 8 years, and the long-term bond has a maturity of 30 years. a. What will be the price of the 4-year bond if its yield increases to 6.00%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What will be the price of the 8-year bond if its yield increases to 6.00%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) c. What will be the price of the 30-year bond if its yield increases to 6.00%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) d What uill a
Problem 6-19 Interest Rate Risk (LO3) Consider three bonds with 5.00% coupon rates, all making annual coupon payments and all selling at face value. The short-term bond has a maturity of 4 years, the intermediate-term bond has a maturity of 8 years, and the long-term bond has a maturity of 30 years. a. What will be the price of the 4-year bond if its yield increases to 6.00%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What will be the price of the 8-year bond if its yield increases to 6.00%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) c. What will be the price of the 30-year bond if its yield increases to 6.00%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) d What uill a
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:9 You skipped this question in the previous attempt.
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Problem 6-19 Interest Rate Risk (LO3)
Consider three bonds with 5.00% coupon rates, all making annual coupon payments and all selling at face value. The short-term bond
has a maturity of 4 years, the intermediate-term bond has a maturity of 8 years, and the long-term bond has a maturity of 30 years.
ts
a. What will be the price of the 4-year bond if its yield increases to 6.00%? (Do not round intermediate calculations. Round your
answer to 2 decimal places.)
b. What will be the price of the 8-year bond if its yield increases to 6.00%? (Do not round intermediate calculations. Round
answer to 2 decimal places.)
c. What will be the price of the 30-year bond if its yield increases to 6.00%? (Do not round intermediate calculations. Round your
answer to 2 decimal places.)
d. What will be the price of the 4-year bond if its yield decreases to 4.00%? (Do not round intermediate calculations. Round
answer to 2 decimal places.)
e. What will be the price of the 8-year bond if its yield decreases to 4.00%? (Do not round intermediate calculations. Round your
answer to 2 decimal places.)
f. What will be the price of the 30-year bond if its yield decreases to 4.00%? (Do not round intermediate calculations. Round your
answer to 2 decimal places.)
g. Comparing your answers to parts (a), (b), and (c), are long-term bonds more or less affected than short-term bonds by a rise in
interest rates?
h. Comparing your answers to parts (d), (e), and (f), are long-term bonds more or less affected than short-term bonds by a decline in
interest rates?
- 02:19 16
your
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your
Hint,
Print
eferences
a,
Bond price
965.35
b.
Bond price
937.90
C.
Bond price
862.35:
d.
Bond price
e.
Bond price
f.
Bond price
g.
Long-term bonds
affected than short-term bonds
h.
Long-term bonds
affected than short-term bonds
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