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Arizona Public Utilities issued a bond that pays ​$60 in​ interest, with a ​$1,000 par value....

Arizona Public Utilities issued a bond that pays ​$60 in​ interest, with a ​$1,000 par value. It matures in 30 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 12 percent or​ (ii) decreases to 7 ​percent?

c.  Explain the implications of your answers in part b as they relate to​ interest-rate risk, premium​ bonds, and discount bonds.

d.  Assume that the bond matures in 10 years instead of 30 years. Recompute your answers in parts a and b.

e.  Explain the implications of your answers in part d as they relate to​ interest-rate risk, premium​ bonds, and discount bonds.

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