Consider two bonds, one with 5 years to maturity and the other with 20 years to maturity Both have $1,000 face values and 8 coupon rates (with annual interest payments), and both sell at par Assume that the yields of both bonds fall to 6 Calculate the dollar increases in the bonds ' prices What per...

Discounting the fiveyear bonds cash flows at 6 gives the following intrinsic value V 80 PVAF 5 years ...

Consider two bonds, one with 5 years to maturity and the other with 20 years to maturity.

Question:

Consider two bonds, one with 5 years to and the other with 20 years to Both have $1,000 face values and 8% rates (with annual interest payments), and both sell at par. Assume that the yields of both bonds fall to 6%. Calculate the dollar increases in the bonds' prices. What percentage of this increase in each case comes from a change in the present value of the bonds' principals, and what percentage comes from a change in the present value of the bonds' interest payments?
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...