Consider three bonds with 8% coupon rates, 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 maturity of 30 years. Compute the price of these bonds if their yields increase to 9% and if it decreases to 7%. What can be concluded?
Consider three bonds with 8% coupon rates, 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 maturity of 30 years. Compute the price of these bonds if their yields increase to 9% and if it decreases to 7%. What can be concluded?
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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Consider three bonds with 8% coupon rates, 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 maturity of 30 years.
Compute the price of these bonds if their yields increase to 9% and if it decreases to 7%. What can be concluded?
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