Liz Khar
Jan 29, 2006, 09:09 PM
Consider three bonds with 8% coupon rates, all selling at face value. The short-term bond has a maturity of 4 years, the intermediate-term bond has maturity 8 years, and the long-term bond has maturity 30 years.
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Maritza Mena
Jul 23, 2011, 08:51 PM
. Interest Rate Risk. Consider three bonds with 8% coupon rates, all selling at face value.
The short- term bond has a maturity of 4 years,
the intermediate- term bond has maturity 8 years,
and the long- term bond has maturity 30 years.
a. What will happen to the price of each bond if their yields increase to 9%?
b. What will happen to the price of each bond if their yields decrease to 7%?
The price of each bond if their yields decrease to 7%
c. What do you conclude about the relationship between time to maturity and the sensitivity of bond prices to interest rates?