An investor purchased the following 5 bonds. Each bond had a par value of $1,000

Question

An investor purchased the following 5 bonds. Each bond had a par value of $1,000 and an 8% 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:

10-year, 10% annual coupan price at 8%, at 7%, percentage change

10-year zero price at 8%, at 7%, percentage change

5-year zero price at 8%, at 7%, percentage change

30-year zero price at 8%, at 7%, percentage change

$100 perpetuity price at 8%, at 7%, percentage change

Explanation / Answer

10-year, 10% annual coupan price at 8%, at 7%, percentage change = 6.7453%

10-year zero price at 8%, at 7%, percentage change = 9.7488%

5-year zero price at 8%, at 7%, percentage change = 4.7611%

30-year zero price at 8%, at 7%, percentage change = 32.1902%

$100 perpetuity price at 8%, at 7%, percentage change = 14.2857%

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