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Category > Accounting Posted 01 May 2017 My Price 3.00

BOND VALUATION

BOND VALUATION An investor has two bonds in his portfolio that have a face value of $1,000 and pay a 10% annual coupon. Bond L matures in 15 years, while Bond S matures in 1 year.

a. What will the value of each bond be if the going interest rate is 5%, 8%, and 12%? Assume that only one more interest payment is to be made on Bond S at its maturity and that 15 more payments are to be made on Bond L.

b. Why does the longer-term bond’s price vary more than the price of the shorter-term bond when interest rates change?

 

Answers

Alpha Geek
(8)
Status NEW Posted 01 May 2017 04:05 PM My Price 3.00

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Attachments

file 1493657990-1549999_1_636291740776820081_Bond.xlsx preview (49 words )
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