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Consider a 12-year, 12 percent annual coupon bond with a required return of 10 percent. The bond has a face value

of $1,000.

a)    What is the price of the bond? If interest rates rise to 11 percent, what is the price of the bond? What has been the percentage change in price?

b)   Repeat part (a) for a 16-year bond.

c)    What do the respective changes in bond prices indicate?

Top Answer

a). Price of the bond = $1,136.27 Price of the bond = $1,064.92 Percentage change in price... View the full answer

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