## (Solved) Problem #2 a. Assume the interest rate in the market (yield to

Problem #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 bond price will be with a 15-year, a 20-year, and a 30-year time period.

 Maturity Bond Price 15 year \$ 20 year \$ 30 year \$

 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 15-year, a 20-year, and a 30-year period.

 Maturity Bond Price 15 year \$ 20 year \$ 30 year \$

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?

 15 years 20 years 30 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?

 15 years 20 years 30 years

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This question was answered on: Oct 15, 2019

Solution~000.zip (25.37 KB)

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Oct 15, 2019

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