Finance Assignment | Professional Writing
You own a bond that pays $100 in annual interest, with a$1000 par value. It matures in 15 years. The market’s required yield to maturity on a comparable-risk bond is 12 percent. a. Calculate the value of the bond. b. How does the value change if the yield to maturity on a comparable-risk bond (i) increases to 15 percent or (ii) decreases to 8 percent?
c. Explain the implications of your answers in part b as they relate tointerest-rate risk, premium bonds, and discount bonds. d. Assume that the bond matures in 5 years instead of 15 years and recalculate your answers in parts a and b. e. Explain the implications of your answers in part d as they relate tointerest-rate risk, premium bonds, and discount bonds.
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