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What is the price of bond market interest rate

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1. Consider two bonds - one that matures in 30-years and the other in 10 years.  Both bonds pay a 5% semi-annual coupon. What is the price of each bond if the market interest rate is 5%?

2. Consider the same two bond in problem #11. What is the price of each bond if the market interest rate increases to 6.0%? (Show work)

3. Consider the same two bonds in problems #11 & 12. What is the price of each bond if the market interest rate increases from 6.0% to 6.5%? (Show work)

4. Summarize the bond prices calculated in problems 11-13 in the table below. Compare the change in bond prices resulting from each change in yield for the two blonds. What do you notice?

 

5.0%

6.0%

6.5%

10-year bond price

 

 

 

30-year bond price

 

 

 

 

Reference no: EM133072655

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