Consider three bonds with 5.20% coupon rates, all making annual coupon payments and all selling at face value. The short-term bond has a maturity of 4 years, the intermediate-term bond has a maturity of 8 years, and the long-term bond has a maturity of 30 years.
a. What will be the price of the 4-year bond if its yield increases to 6.20%? Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
b. What will be the price of the 8-year bond if its yield increases to 6.20%? Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
c. What will be the price of the 30-year bond if its yield increases to 6.20%? Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
d. What will be the price of the 4-year bond if its yield decreases to 4.20%? Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
e. What will be the price of the 8-year bond if its yield decreases to 4.20%? Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
f. What will be the price of the 30-year bond if its yield decreases to 4.20%? Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
g. Comparing your answers to parts (a), (b), and (c), are long-term bonds more or less affected than short-term bonds by a rise in interest rates?
h. Comparing your answers to parts (d), (e), and (f), are long-term bonds more or less affected than short-term bonds by a decline in interest rates?
a. Bond price b. Bond price c. Bond price d. Bond price e. Bond price f. Bond price g. Long-term bonds • affected than short-term bonds It Long-term bonds • affected than short-term bonds
