(Bond valuation relationships) Arizona Public Utilities issued a bond that pays $80 in interest, with a $1,000 par value. It matures in 25 years. The market's required yield to maturity ona comparable-risk bond is 7 percent.a: Calculate the value of the bondb. How does the value change if the market's required yield to maturity on a comparable-risk bond () increases to 10 percent or (4) decreases to 6 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 5 years instead of 25 years. Recompute your answers in parts a and be. Explain the implications of your answers in part d as they relate to interest-rate risk, premium bonds, and discount bonds.a. What is the value of the bond if the markets required yield to maturity on a comparable-risk bond is 7 percent?$1,116.54 (Round to the nearest cent)b. () What is the value of the bond if the market's required yield to maturity on a comparable-risk bond increases to 10 percent?$1229.40 (Round to the nearest cent)

Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…

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 () increases to 10 percent or ) decreases to 6 percent? c. Explain the implications of your answers in part b as they relate to interest-rate risk, premium bonds, and discount bonds.

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 () increases to 10 percent or ) decreases to 6 percent? c. Explain the implications of your answers in part b as they relate to interest-rate risk, premium bonds, and discount bonds.

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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