Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Refer to Table 10-2.
a. Assume the interest rate in the market (yield to maturity) goes down to 8 percent for the 10 percent bonds. Using column 2, indicate what the
b. Assume the interest rate in the market (yield to maturity) goes up to 12 percent for the 10 percent bonds. Using column 3, indicate what the bond price will be with a 10-year, a 20-year, and a 25-year period.
c. Assume the interest rate in the market (yield to maturity) goes down to 8 percent for the 10 percent bonds. If interest rates in the market are going down, which bond would you choose to own?
multiple choice 1
-
10 Years
-
20 Years
-
25 Years
d. Assume the interest rate in the market (yield to maturity) goes up to 12 percent for the 10 percent bonds. If interest rates in the market are going up, which bond would you choose to own?
multiple choice 2
-
10 Years
-
20 Years
-
25 Years
Transcribed Image Text:Table 10-2 Impact of time to maturity on bond prices
ME
Time Period in
Years to Maturity
OT
0
1
20
(10% Interest Payment, Various Times to Maturity)
Bond Price with 8%
Yield to Maturity
$1,000.00
1,018.52
1,079.85
1,134.20
1,171.19
1,196.36
1,213.50
1,225.16
Bond Price with 12%
Yield to Maturity
$1,000.00
982.14
927.90
887.00
863.78
850.61
843.14
838.90
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