To keep things simple, assume a zero$-$coupon bond. Bond X pays $$20,000$ in $10$ years. Bond Y pays $$20,000$ in $20$ years.

Suppose the interest rate increases to $14$ percent. Using the rule of $70,$ the value of Bond X is now approximately $

$,$ and the value of Bond Y is approximately $

$.$ Now, suppose the interest rate is $7$ percent. Using the rule of $70,$ the value of Bond X today is approximately $

$,$ and the value of Bond Y today is approximately $

$.$

Note: Round all your answers in whole number $($no decimal$).$ In addition, do not include comma $(,)$ or $ in your answers.

Answer rating: 100% (QA)

To calculate the values of Bond X and Bond Y under differen... View the full answer