(Bond valuation? relationships) You own a bond that pays ?$120 in annual? interest, with a ?$1,000 par value. It matures in 20 years. The? market's required yield to maturity on a? comparable-risk bond is 10 percent.
a. Calculate the value of the bond.
b. How does the value change if the yield to maturity on a? comparable-risk bond? (i) increases to 14 percent or? (ii) decreases to 6 ?percent?
c. Explain the implications of your answers in part b as they relate to? interest-rate risk, premium? bonds, and discount bonds.
d. Assume that the bond matures in 3 years instead of 20 years and recalculate your answers in parts a and b.
e. Explain the implications of your answers in part d as they relate to? interest-rate risk, premium? bonds, and discount bonds.
a. What is the value of the bond if the? market's required yield to maturity on a? comparable-risk bond is 10 ?percent??$ ?(Round to the nearest? cent.)