FINANCE-Consider three bonds with 6.7% coupon rates
QUESTION
Consider three bonds with 6.7% coupon rates, all making annual coupon payments and all selling at a face value of $1,000. The short-term bond has a maturity of 4 years, the intermediate-term bond has maturity 8 years, and the long-term bond has a maturity of 30 years.a. What will be the price of each bond if their yields increase to 7.7%?b. What will be the price of each bond if their yields decrease to 5.7%?
ANSWER:
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