?(Bond valuation?) You are examining three bonds with a parvalue of $1,000 ?(you receive $1,000 at? maturity) and areconcerned with what would happen to their market value if interestrates? (or the market discount? rate) changed. The three bondsare:
Bond A—a bond with 4 years left to maturity that has an annualcoupon interest rate of 8 ?percent, but the interest is paidsemiannually.
Bond B —a bond with 12 years left to maturity that has an annualcoupon interest rate of 8 ?percent, but the interest is paidsemiannually.
Bond C —a bond with 15 years left to maturity that has an annualcoupon interest rate of 8 ?percent, but the interest is paidsemiannually.
What would be the value of these bonds if the market discountrate were:
a. 8 percent per year compounded? semiannually?
b. 6 percent per year compounded? semiannually?
c. 17 percent per year compounded? semiannually?
d. What observations can you make about these? results?
