Interest Rates and Bonds

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Bonds

There
is an inverse relationship between bond prices and yields. This inverse
relationship will be demonstrated by calculating bond prices to show
that interest rates move inversely: if yields rise, then bond prices
fall. Bonds will be sold either at a premium or a discount. With this in
mind respond to the following question.

You
currently own a 30 year Treasury Bond paying a 4% annual coupon rate.
The market interest rates for like securities rose to 5%. Would your
bond sell for a premium or a discount? Why?

What would the market value of your bond be? Prove your answer by showing your work, the appropriate factors, or the factors that would be used for the fx calculator.

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