Question: b. What is the relationship between price and yield? Price and yield are (Directly/Inversly) Directly Inversely related. c. What is the relationship between bond price

b. What is the relationship between price and yield? Price and

b. What is the relationship between price and yield?

Price and yield are (Directly/Inversly) Directly Inversely related.

c. What is the relationship between bond price changes and time to maturity?

Bond prices change (more for long terms/less for long terms) more for longer terms, less for longer terms, for a given yield change.

A $1,000 par value bond has a 9 percent coupon, which is paid on a semiannual basis. It matures in either 1 year or 20 years. Current yields on similar bonds are either 6 percent or 10 percent. a. Calculate the price of the bond for the four possibilities. (Use a Financial calculator to arrive at the answers. Do not round Intermediate calculations. Round the final answer to 2 decimal places.) Price of the bond $ $ 1 year 1 year 20 years 20 years 6 percent 10 percent 10 percent 6 percent A A A A $

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