(Bond valuation? relationships) A bond of Telink Corporation pays ?$100 in annual? interest, with a ?$1,000 par value. The bonds mature in 15 years. The? market's required yield to maturity on a? comparable-risk bond is 8 percent.
a. Calculate the value of the bond.
b. How does the value change if the? market's required yield to maturity on a? comparable-risk bond? (i) increases to 13 percent or? (ii) decreases to 4 percent?
c. Interpret your findings in parts a and b
a. What is the value of the bond if the? market's required yield to maturity on a? comparable-risk bond is 88 ?percent?
?$ nothing ?(Round to the nearest? cent.)
b. ?(i) What is the value of the bond if the? market's required yield to maturity on a comparable risk bond increases to 13 ?percent?
?$ nothing ?(Round to the nearest? cent.)
b. ?(ii) What is the value of the bond if the? market's required yield to maturity on a comparable risk bond decreases to 4 ?percent?
?$ nothing ? (Round to the nearest? cent.)
c. The change in the value of a bond caused by changing interest rates is called? interest-rate risk. Based on the answers in part b?, a decrease in interest rates? (the yield to? maturity) will cause the value of a bond (increase, decrease or remain unchanged); by contrast, an increase interest rates will cause the value to (increase, decrease and remain unchanged).