ulate the price of the bond for the four possibilities. (Use a Financial calculator to arrive at the answers. Do not round intermediate calculations. Round the final answer to 2 decimal places.) Price of the bond 2 years 8 percent $ 2 years 12 percent $ 10 years 12 percent $ 10 years 8 percent $ b. What is the relationship between price and yield? Price and yield are directly/inversly related. c. What is the relationship between bond price changes and time to maturity? Bond prices change are more for longer terms/less for longer terms for a given yield change.
A $1,000 par value bond has a 10 percent coupon, which is paid on a semiannual basis. It matures in either 2 years or 10 years. Current yields on similar bonds are either 8 percent or 12 percent.
a. Calculate the price of the bond for the four possibilities. (Use a Financial calculator to arrive at the answers. Do not round intermediate calculations. Round the final answer to 2 decimal places.)
| Price of the bond | ||
| 2 years | 8 percent | $ |
| 2 years | 12 percent | $ |
| 10 years | 12 percent | $ |
| 10 years | 8 percent | $ |
b. What is the relationship between price and yield?
Price and yield are directly/inversly related.
c. What is the relationship between
Bond prices change are more for longer terms/less for longer terms for a given yield change.
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