Interest Rate Risk

Consider three bonds with $6\mathrm{.}29\%$ coupon rates, all selling at face value. The short$-$term bond has a maturity of $4$ years, the intermediate$-$term bond has maturity $8$ years, and the long$-$term bond has maturity $30$ years.

a$.$

What will be the price of each bond if their yields increase to $7\mathrm{.}5\%?($Do not round intermediate calculations. Round your answers to $2$ decimal places.$)$

$4$ Years $8$ Years $30$ Years

Bond price $

$

$

b$.$

What will be the price of each bond if their yields decrease to $5\mathrm{.}3\%?($Do not round intermediate calculations. Round your answers to $2$ decimal places.$)$

$4$ Years $8$ Years $30$ Years

Bond price $

$

$

c$.$ Which bond is most sensitive to changes in the interest rates?multiple choice $1$

$4$ Year

$8$ Year

$30$ Year

They are all the same

d$.$ When interest rates rise then the price of the bond

$($Click to select$)$

c$.$ Are long$-$term bonds more or less affected than short$-$term bonds by a rise in interest rates?

multiple choice $3$

More affected

Less affected

d$.$Would you expect long$-$term bonds to be more or less affected by a fall in interest rates?

multiple choice $4$

More affected

Less affected