You are examining three bonds with a par value of $1,000 ?(you receive ?$1,000 at? maturity) and are concerned with what would happen to their market value if interest rates? (or the market discount? rate) changed. The three bonds are
Bond A—a bond with 5 years left to maturity that has an annual coupon interest rate of 8 percent, but the interest is paid semiannually.
Bond B—a bond with 9 years left to maturity that has an annual coupon interest rate of 8 ?percent, but the interest is paid semiannually.
Bond C—a bond with 19 years left to maturity that has an annual coupon interest rate of 8 ?percent, but the interest is paid semiannually.
What would be the value of these bonds if the market discount rate were
a. 8 percent per year compounded? semiannually?
b. 4 percent per year compounded? semiannually?
c. 18 percent per year compounded? semiannually?
d. What observations can you make about these? results?