Consider a bond with a face value of $1000, a coupon rate of 8% (paid...
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Consider a bond with a face value of $1000, a coupon rate of 8% (paid annually), and ten years to maturity. What is required of you: a. What is the price of this bond if the required rate of return (r) is 18 percent? b. What is the price if r increases to 20 percent? By what percentage did the price of the bond change? c. What is the price if r is five percent? If r increases to seven percent, what is the percentage change in price? d. From your answers in a to c, what can you say about the relative price volatility of a bond in high compared to low-interest rate environments?
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