Problem:
Consider a 15-year bond with 8 percent semi-annual coupons and $1,000 face value.
Required:
Question 1: What is the price of the bond if the yield to maturity is 6 percent?
Question 2: What is the bond price if the yield increases to 10 percent?
Question 3: What is the bond price is the yield to maturity is 8 percent?
Question 4: Compare the yield to maturity with the coupon rate, and the bond prices in part a, b and c, what conclusion cans you draws?
Note: Provide support for your underlying principle.