Question: could i please get help An investor has two bonds in his portfolio that have a face value of $1,000 and pay a 10% annual
An investor has two bonds in his portfolio that have a face value of $1,000 and pay a 10% annual coupon. Bond L matures in 15 years, while Bond S matures in 1 year. a. What will the value of the Bond L be if the going interest rate is 7%6,8%, and 11%%. Assume that only one more interest payment is to be made on Bond S at its maturity and that 15 more payments are to be made on Bond L Round your answers to the nearest cent. b. Why does the longer-term bond's price vary more than the price of the shorter-term bond when interest rates change? 1. Long-term bonds have lower interest rate risk than do short-term bonds. II. Long-term bonds have lower reinvestment rate risk than do short-term bonds. iII. The change in price due to a change in the required rate of return increases as a bond's maturity decreases. IV. Long-term bonds have greater interest. rate risk than do short-term bonds. V. The change in price due to a change in the required rate of return decreases as a bond's maturity increases
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
