Given the fair prices at the various yields to maturity can

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Radiologic Technologies has several bond issues on The New York Stock Exchange. With identical coupon rates of 8.75%, Radiologic Technologies has one issue that matures in 1 year, one in 7 years, and the third in 15 years. A coupon payment was made yesterday. (Set up a spreadsheet or a table to calculate these in an easier manner. Each question a-c below has a 1, 7 and 15 year answer.) a. If the yield to maturity for all three bonds is 8.15%, what is the fair price of each bond? b. Suppose that the yield to maturity for all of these bonds changed instantaneously to 7.25%. What is the fair price of each bond now? c. Suppose that the yield to maturity for all of these bonds changed instantaneously again, this time to 9.5%. Now what is the fair price of each bond? d. Given the fair prices at the various yields to maturity, can you assume interest-rate risk the same, higher, or lower for longer- versus shorter-maturity bonds?

Reference no: EM13484519

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