You find a bond with 16 years until maturity that has a coupon rate of 8.5 perce

Question

You find a bond with 16 years until maturity that has a coupon rate of 8.5 percent and a yield to maturity of 8 percent. Suppose the yield to maturity on the bond increases by .25 percent.

What is the new price of the bond using duration? (Round your answers to 2 decimal places. Omit the "$" sign in your response.)

What is the new price of the bond if interest rates increase by 1 percent? (Round your answers to 2 decimal places. Omit the "$" sign in your response.)

You find a bond with 16 years until maturity that has a coupon rate of 8.5 percent and a yield to maturity of 8 percent. Suppose the yield to maturity on the bond increases by .25 percent.

Explanation / Answer

1> Year Coupon@8.5% Estimated PricePV@8% Actual Price PV@8.25% 1 85 78.70 78.34 2 85 72.87 72.20 3 85 67.48 66.55 4 85 62.48 61.33 5 85 57.85 56.53 6 85 53.56 52.10 7 85 49.60 48.02 8 85 45.92 44.26 9 85 42.52 40.79 10 85 39.37 37.59 11 85 36.46 34.65 12 85 33.75 31.93 13 85 31.25 29.43 14 85 28.94 27.13 15 85 26.80 25.00 16 85 24.81 23.04 16 1000 291.89 271.10 Price 1044.26 1000.00 2> Year Coupon@9.5% Estimated PricePV@8% Actual Price PV@8.25% 1 95 87.96 87.56 2 95 81.45 80.70 3 95 75.41 74.38 4 95 69.83 68.55 5 95 64.66 63.18 6 95 59.87 58.23 7 95 55.43 53.67 8 95 51.33 49.46 9 95 47.52 45.59 10 95 44.00 42.02 11 95 40.74 38.73 12 95 37.73 35.69 13 95 34.93 32.90 14 95 32.34 30.32 15 95 29.95 27.94 16 95 27.73 25.75 16 1000 291.89 271.10 Price 1132.77 1085.75

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