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URGENT ANSWERS PLUS EXPLANATIONS-HOW YOU GOT ANSWER PLEASE. (Interest Rate Sensitivity) An investor purchased the following...

URGENT ANSWERS PLUS EXPLANATIONS-HOW YOU GOT ANSWER PLEASE.

  1. (Interest Rate Sensitivity) An investor purchased the following 4 bonds. Each bond had a face(par) value of $1,000 and an 6% yield to maturity on the purchase day. Immediately after the investor purchased them, interest rates changed, and each then had a new YTM (7% or 5%). What is the percentage change in price for each bond after the decline in interest rates? Fill in the following table with your answers.

Bond

Price@5%

Price@7%

Price Gain/Loss (Percentage Change)

10-year, 6.5% annual coupon

30-year, 12% annual coupon

10-year,zero coupon

30-year,zero coupon

  1. (Bond Price and Duration) Consider a 6-year 4% coupon bond with a face value of $1,000. Coupons are paid annually. The yield is 3.8%.
    1. Use the following table to compute the duration.

year (t)

cash flow

PV=CF/(1+r)^t

PV*t

1

2

3

4

5

6

Total

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