Consider three bonds with 5.20% coupon rates, all making annualcoupon payments and all selling at face value. The short-term bondhas a maturity of 4 years, the intermediate-term bond has amaturity of 8 years, and the long-term bond has a maturity of 30years.
a. What will be the price of the 4-year bond ifits yield increases to 6.20%?
b. What will be the price of the 8-year bond ifits yield increases to 6.20%?
c. What will be the price of the 30-year bond ifits yield increases to 6.20%?
d. What will be the price of the 4-year bond ifits yield decreases to 4.20%?
e. What will be the price of the 8-year bond ifits yield decreases to 4.20%?
f. What will be the price of the 30-year bond ifits yield decreases to 4.20%?
