Determining present value of discount bond

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Reference no: EM1338652

Find the present value (price) of a discount bond with a one-year term to maturity and a 10% yield. Next, find the price of a ten-year discount bond that also yields 10%. Now, increase the yield on both instruments to 11%. On a percentage basis, which instrument demonstrates the greatest change in price? What does this indicate about the price risk of the one-year bond in relation to an otherwise comparable 10-year bond, and what are the attendant implications?

Reference no: EM1338652

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