Consider 3 bonds with maturities of 3, 8, and 15 years. All three bonds have a coupon rate of 6%, face values of $1,000, and make semiannual coupon payments. Now, answer the following questions: a) What would be the market price of each bond if their YTM was 4%? (3 points) b) What would be the market price of each bond if their YTM was 8%? (3 points) c) What conclusions can you make regarding the relation between time to maturity and the sensitivity of bond prices to changes in interest rates? (3 points)

Answer rating: 100% (QA)

To calculate the market price of each bond we can use the present value formula taking into account the bonds coupon payments and face value Given Bon... View the full answer