Monday

November 24, 2014

November 24, 2014

Posted by **sam** on Saturday, October 30, 2010 at 1:00pm.

Exchange. Suppose PhilEl’s bonds have identical coupon rates of 9.125% but that one issue

matures in 1 year, one in 7 years, and the third in 15 years. Assume that a coupon payment

was made yesterday.

a. If the yield to maturity for all three bonds is 8%, what is the fair price of each bond?

b. Suppose that the yield to maturity for all of these bonds changed instantaneously to 7%.

What is the fair price of each bond now?

c. Suppose that the yield to maturity for all of these bonds changed instantaneously again,

this time to 9%. Now what is the fair price of each bond?

d. Based on the fair prices at the various yields to maturity, is interest-rate risk the same,

higher, or lower for longer- versus shorter-maturity bonds?

**Answer this Question**

**Related Questions**

finance - 1. Yest Corporation's bonds have a 15-year maturity, a 7% semiannual ...

finance (higher interest rate) - A higher interest rate (discount rate) would? A...

accounting - Assume Venture Healthcare sold bonds that have a ten-year maturity...

finance - One year ago, Auto Land issued 10-year bonds at par. The bonds have a ...

fin 370 - (individual or component costs of capital)Compute the cost of the ...

Macro Economics - On April 20, 2008 your wealthy aunt will give you a bond with ...

Finance - Some institutional investors prefer zero coupon bonds over coupon ...

finance - Leggio Corporation issued 20-year, 7% annual coupon bonds at their par...

Finance - Zabberer Corporation bonds pay a coupon rate of interest of 12 percent...

Fiance - ABC stock sells for $22 bucks a share. The company wants to sell 20 ...