Question 23. 23. Given a $100,000, 20 year, 7% (coupon rate) Treasury bond. On t

Question

Question 23.23. Given a $100,000, 20 year, 7% (coupon rate) Treasury bond. On the day of the purchase (at a price of $100,000), market interest rates rise to 8%. The value of that bond would immediately change by (nearest): [Assume twice a year interest payments] (Points : 3)        $ 7,500
       $ 9,300
       $10,400
       $12,700 Question 24.24. Which of the following is NOT true regarding Bretton Woods? (Points : 3)        It created the International Monetary Fund (IMF)
       It created the World Bank (IBRD)
       The agreement lasted (roughly) from about 1945 to 1971
       It was based on a commitment to fixed exchange rates
       None of the above-all are TRUE of Bretton Woods Question 23.23. Given a $100,000, 20 year, 7% (coupon rate) Treasury bond. On the day of the purchase (at a price of $100,000), market interest rates rise to 8%. The value of that bond would immediately change by (nearest): [Assume twice a year interest payments] (Points : 3)        $ 7,500
       $ 9,300
       $10,400
       $12,700

Explanation / Answer

For Question 23, if we calculate the present value of all the coupon payments for 20 year, it would be $7000 for the next 20 years discount at interest rate 8% which would be 68,727 approx.

Now interest payments at 8% twice a year would be 40 periods 4000 $ discounted at 4% per period and it would be 79171 $.

Now as interest payments are more than what we are receiving in coupons, so it should trade at discount of their difference, so price would change by

Answer 24 None of the above as all above are true

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