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Homework:Chapter 9 Homework_SP 2022
Question 8, P9-19 (similar to)
Part 1 of 9
HW Score: 15.79%, 3 of 19 points
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Part 1
​(Bond valuation​ relationships)  Arizona Public Utilities
issued a bond that pays
​$70
in​ interest, with a
​$1,000
par value. It matures in
30
years. The​ market's required yield to maturity on
a​ comparable-risk bond is
8
percent.
a.  Calculate the value of the bond.
b.  How does the value change if the​ market's required
yield to maturity on a​ comparable-risk bond​ (i)
increases to
12
percent or​ (ii) 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
15
years instead of
30
years. Recompute 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.
Question content area bottom
Part 1
a.  What is the value of the bond if the​ market's required
yield to maturity on a​ comparable-risk bond is
8
​percent?