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Consider a 12-year 12 percent annual coupon bond with a

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?

b. If interest rates rise to 11 percent, what is the price of the bond?

c. What has been the percentage change in price?

d. Repeat parts (a), (b), and (c) for a 16-year bond. What do the respective changes in bond prices indicate?

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Solution Preview :

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Macroeconomics: Consider a 12-year 12 percent annual coupon bond with a

Reference No:- TGS0656243

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