Maurice Tutor

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    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

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    Phoniex University
    Oct-2001 - Nov-2016

Category > Accounting Posted 18 Aug 2017 My Price 7.00

interest rate

Bond A pays $8,000 in 20 years. Bond B pays $8,000 in 40 years. (To keep things simple, assume these are zero-coupon bonds, which means the $8,000 is the only payment the bondholder receives.)

Suppose the interest rate is 3.5 percent.

Using the rule of 70, the value of Bond A is approximately ________, and the value of Bond B is approximately _________.

Now suppose the interest rate increases to 7 percent.

Using the rule of 70, the value of Bond A is now approximately ______ , and the value of Bond B is approximately _______

Comparing each bondAc€?cs value at 3.5 percent versus 7 percent, Bond AAc€?cs value decreases by a _________ percentage than Bond BAc€?cs value.

The value of a bond ________ when the interest rate increases, and bonds with a longer time to maturity are   sensitive to changes in the interest rate.

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Maurice Tutor
(5)
Status NEW Posted 18 Aug 2017 10:08 PM My Price 7.00

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