(Related to Checkpoint 9.3) (Bond valuation relationships) You own a bond that pays $100 in annual interest, with a $1,0

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Related To Checkpoint 9 3 Bond Valuation Relationships You Own A Bond That Pays 100 In Annual Interest With A 1 0 1 (27.21 KiB) Viewed 23 times

(Related to Checkpoint 9.3) (Bond valuation relationships) You own a bond that pays $100 in annual interest, with a $1,000 par value. It matures in 15 years. The market's required yield to maturity on a comparable-risk bond is 12 percent a. Calculate the value of the bond b. How does the value change if the yield to maturity on a comparable-risk bond (1) increases to 14 percent or (i) decreases to 7 percent? c. Explain the implications of your answers in part b as they relate to interest-rate risk, premium bonds, and discount bonds d. Assume that the bond matures in 4 years instead of 15 years and recalculate your answers in parts a and b. e. Explain the implications of your answers in part d as they relate to interest-rate risk, premium bonds, and discount bonds.