Consider three bonds with 8 coupon rates, all making annual coupon payments and all selling at face value The short term bond has a maturity of 4 years, the intermediate term bond has maturity 8 years, and the long term bond has maturity 30 years a What will be the price of each bond if their yield...

ab Price of Each Bond at Different Yields to Maturity Maturity ...

Consider three bonds with 8% coupon rates, all making annual coupon payments and all selling at face

Question:

Consider three bonds with 8% rates, all making annual payments and all selling at face value. The short-term bond has a of 4 years, the intermediate-term bond has 8 years, and the long-term bond has 30 years.
a. What will be the price of each bond if their yields increase to 9%?
b. What will be the price of each bond if their yields decrease to 7%?
c. Are long-term bonds more or less affected than short-term bonds by a rise in interest rates?
d. Would you expect long-term bonds to be more or less affected by a fall in interest rates?
Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...