Interest rate sensitivity An investor purchased the following 5 bonds. Each bond

Question

Interest rate sensitivity An investor purchased the following 5 bonds. Each bond had a par value of S1.000 and an 10% yield to maturity on the purchase day. Immediately after the investor purchased them, interest rates fell and each then had a new YTM of 7%. What is the percentage change in price for each bond after the decline in interest rates? Fill in the following table. Round your answers to the nearest cent or to two decimal places. price @10% price @7% percentage change 10-year, 10% annual coupon 10-years zero 5-years zero 30-years zero $100 perpetuity

Explanation / Answer

by duration formula (excel) 10 year,10% annual coupon would increase by 7.07% 10 year, zero would increase by 10% 5 year, zero would increase by 5% 30 year, zero would increase by 30%

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