Question: 12) Given the following information about three bonds, answer the questions below. Bond A B C Par value $1,000 $1,000 $1,000 Coupon rate 6% 6%

12) Given the following information about three bonds, answer the questions below. Bond A B C Par value $1,000 $1,000 $1,000 Coupon rate 6% 6% 6% Time to maturity 1 yr. 5 yrs. 20 yrs. a. Assume interest is paid annually and calculate the prices of the bonds at an 11 percent interest rate. b. Do bond prices vary directly or inversely with interest rates? c. Do bond prices become more, or less, sensitive to interest rate changes as time to maturity increase? Does this suggest short-term bonds are more, or less, risky than long-term bonds

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