File Edit View History Bookmarks PeopleWindow Help Chapter 10 E × G·) Do high in
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File Edit View History Bookmarks PeopleWindow Help Chapter 10 E × G·) Do high interest rates lead × Interviews with MetLife Inves: -20189:390 · ezto.mheducation.com/hm.tpx a.rutgers.ou.. ", welcome, JONATH M McGraw-Hill Conne.. wu The wall Street Jour i Handshake Bond Prices and Interest Rate Changes-Excel Sign Ir FILE HOME INSERT PAGE LAYOUT FORMULAS DATA REVIEW VIEW Calon 11 A A Editing aste, B 1 u. B-5- . Alignment Number Conditional Format as Cell Cells Formatting Table Styles Styles Font lipboard A 6.50 percent coupon bond with ten years left to maturity is priced to offer a 8.0 percent yield to maturity. You believe that in one year, the yield to maturity will be 7.0 percent. What is the change in price the bond will experience in dollars? (Do not round intermediate calculations and round your final answer to 2 decimal places.) Coupon rate Maturity Present YTM Expected YTM in 1 year 6.50% 10 8.0% 70% Complete the following analysis. Do not hard code values in your calculations Current price Expected price in 1 year Change in price .. Sheet1 .. tempt(s)Explanation / Answer
Answer a.
Face Value = $1,000
Annual Coupon Rate = 6.50%
Semiannual Coupon Rate = 3.25%
Semiannual Coupon = 3.25% * $1,000
Semiannual Coupon = $32.50
Time to Maturity = 10 years
Semiannual Period to Maturity = 20
Annual YTM = 8.0%
Semiannual YTM = 4.0%
Price of Bond = $32.5 * PVIFA(4%, 20) + $1,000 * PVIF(4%, 20)
Price of Bond = $32.5 * (1 - (1/1.04)^20) / 0.04 + $1,000 / 1.04^20
Price of Bond = $898.07
Answer b.
Face Value = $1,000
Semiannual Coupon = $32.50
Time to Maturity = 9 years
Semiannual Period to Maturity = 18
Annual YTM = 7.0%
Semiannual YTM = 3.5%
Price of Bond = $32.5 * PVIFA(3.5%, 18) + $1,000 * PVIF(3.5%, 18)
Price of Bond = $32.5 * (1 - (1/1.035)^18) / 0.035 + $1,000 / 1.035^18
Price of Bond = $967.03
Change in Price = $967.03 - $898.07
Change in Price = $68.96
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