A bond has the following terms:
Principle amount $1000
Semi--annual interest $50
Maturity 20 years
a. what is the bonds price if comparable debt yields 12%?
b. what would be the price if comparable debt yields 12% and the bond matures after 5 years?
c. what are the current yields and yields to maturity in a. and b. ?
d. what would be the bonds price in a. and b. if interest rates declined to 8%?
e. what are the current yields and yield to maturity in d.? what two generalizations may be drawn from the above price changes?