Question

Calculate the new price of bond at the new YTM of 2%, 4%, 6%, 8%, and...

Calculate the new price of bond at the new YTM of 2%, 4%, 6%, 8%, and 10% for both 5-years bond and 30-years bond. Plot the graph of the relationship between the price and YTM for each bond on the same graph. What did you find regarding the relationship between price and YTM for shorter and longer maturity bond? Which bond has a higher sensitive to the change in the price when the yield change?

Bond

Rating

Coupon Rate (%)

Coupon Payment = Coupon Rate %*1,000

Maturity (N)

YTM (%I/Y)

$ Price = % quoted price *1,000

Shorter Maturity Bond

bbb

3.650%

6/20/2024

3.659%

36.50

Longer Maturity Bond

A+

2.875%

8/15/2029

2.743%

28.75

Price@2%

Price@4%

Price@6%

Price@8%

Price@10%

5-year bond

(Shorter Bond)

30-year bond

(Longer Bond)

To calculate the bond prices at the new YTM for shorter bond and longer bond place the value in the table

___________ PMT, 1,000 FV, 2% I/Y, ____5_____ N, CPT PV___________

Math   Advanced-Math   
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Homework Answers

Answer #1

Suppose the face value (par value) is $1000.

price at 2% price at 4% price at 6% price at 8% price at 10%
5 years bond 1117.84 1022.26 936.81 860.26 791.51
30 years bond 1559.91 1086.46 793.53 605.98 481.52

It can be found that as the YTM rises,the bond price falls.A general conclusion from the graph can be that the bond price decreases with a rise in YTM.WE can say that there is an inverse relationship between bond price and YTM.

The longer maturity bonds will be priced higher than shorter maturity bonds.Here bond having 30 years maturity prices bond than the bond with % years of maturity.

The 30-year bond is sensitive to change in the price than a 5-year bond.

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