Consider the following two links:

bond one

Time to maturity: 10 years from today

Face value: $1,000

Annual Coupon rate: 6%

Number of annual payments: 1

Garden B

Time to maturity: 20 years from today

Face value: $1,000

Annual Coupon rate: 9%

Number of annual payments: 1

Calculate the price of each bond. The current market interest rate of the bonds is 8%. Suppose the YTM of each bond is equal to the current market interest rate. Then make a table comparing bond prices when YTM changes between 1%, 2% … 17%.

Calculation time and modified time for each bond.

If YTM goes from 8% to 9%, use the (modified) period to estimate the percentage change in the price of each bond.

Answer rating: 100% (QA)

To calculate the price of each bond we can use the formula for the present value of a bonds cash flows The formula is as follows Bond Price C 1 rn F 1 rn Where C Annual coupon payment r Yield to matur... View the full answer