Question

Consider a 12-year, 12 percent annual coupon bond with a required rate of return of 10 percent. The bond has a face value of $ 1,000.
a. What is the fair present value of the bond?
b. If the required rate of return rises to 11 percent, what is the fair present value of the bond?
c. What has been the percentage change in the fair present value?
d. Repeat parts (a), (b), and (c) for a 16-year bond.
e. What do the respective changes in bond values indicate?



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  • CreatedJanuary 27, 2015
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