A(n) eight-year bond has a yield of 9% and a duration of 7.204 years. If the bon
ID: 2720555 • Letter: A
Question
A(n) eight-year bond has a yield of 9% and a duration of 7.204 years. If the bond's yield increases by 50 basis points, what is the percentage change in the bond's price? (Input the value as a positive value. Do not round intermediate calculations. Round your answer to 2 decimal places.)
A(n) eight-year bond has a yield of 9% and a duration of 7.204 years. If the bond's yield increases by 50 basis points, what is the percentage change in the bond's price? (Input the value as a positive value. Do not round intermediate calculations. Round your answer to 2 decimal places.)
Explanation / Answer
Answer Yield 9% Time Period 7.204 yrs Assume Bond Face Value 1000 Risk free return 5% Bond value = 90 (PVIFA 5% ,7.204)+1000(PVIF 5%,7.204) Bond value =1237.04 Yield 9.5% Time Period 7.204 yrs Assume Bond Face Value 1000 Risk free return 5% Bond value = 95 (PVIFA 5% ,7.204)+1000(PVIF 5%,7.204) Bond value =1266.68 Price changes in bond price = 1266.68-1237.04 = 29.64 Price changes in bond price in % = 29.64/1237.04*100 = 2.40% Increased
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.