Consider three bonds with 5.10% 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 6.10%? (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 6.10%? (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 6.10%? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

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 three bonds with 5.10% 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 6.10%? (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 6.10%? (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 6.10%? (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 4.10%? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

e. What will be the price of the 8-year bond if its yield decreases to 4.10%? (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 4.10%? (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?

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