Consider an america off line thirty year semiannual bond., Ask an Expert

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Consider an America Off-Line 30 year, semiannual bond. It is issued at par (coupon rate = 6%) today. Interest rates remain at 6% for 5 years, and then GRADUALLY, over 5 years rises to 7%, Then interest rates GRADUALLY fall over 10 years, reaching 5% when the bond has 10 years to maturity remaining. Interest rates then remain at 5 % for the remainder of its 30 year maturity.

Along a time line, sketch the profile of the bond price (NOT A PROFILE OF INTEREST RATES). BE AS PRECISE AS POSSIBLE IN DRAWING YOUR DIAGRAM.

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