9
Bond Features 

Maturity (years) = 
8 
Face Value = 
$1,000 
Starting Interest Rate 
3.81% 
Coupon Rate = 
3% 
Coupon dates (Annual) 
If interest rates change from 3.81% to 5.42% immediately after you buy the bond today (and stay at the new interest rate), what is the price effect in year 4 ?
State your answer to the nearest penny (e.g., 48.45)
If there is a loss, state your answer with a negative sign (e.g., 52.30)
Value of Bond @ 3.81%
Value of Bond =
Where r is the discounting rate of a compounding period i.e. 0.0381
And n is the no of Compounding periods 4 years
Coupon 3%
=
= 970.47
Value of Bond @ 5.42%
Value of Bond =
Where r is the discounting rate of a compounding period i.e. 0.0542
And n is the no of Compounding periods 4 years
Coupon 3%
=
= 915.02
Change = 915.02  970.47 = 55.45
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