Question

Bond Features

Maturity (years) = 9

Face Value = $1,000 Starting

Interest Rate 3.28%

Coupon Rate = 5%

Coupon dates (Annual)

If interest rates change from 3.28% to 6.39% 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)

Answer #1

The price effect will be depicted by the difference in the price of Bond in years 4 at rate of 3.28% & 6.39%

**Value of Bond @
3.28%**

**Value of Bond** **=
**

Where r is the discounting rate of a compounding period i.e. 0.0328

And n is the no of Compounding periods 5 years

Coupon 5%

=

= 1078.15

**Value of Bond @
6.39%**

**Value of Bond** **=
**

Where r is the discounting rate of a compounding period i.e. 0.0639

And n is the no of Compounding periods 5 years

Coupon 5%

=

= 942.06

**Change = 942.06
- 1078.15 = -136.09**

A.
Bond Features
Maturity (years) =
10
Face Value =
$1,000
Starting Interest Rate
4.98%
Coupon Rate =
4%
Coupon dates (Annual)
If interest rates change from 4.98% to 6.58% immediately after
you buy the bond today (and stay at the new interest rate), what is
the price effect in year 3 ?
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)
B.
Bond Features
Maturity...

Bond Features
Maturity (years) =
9
Face Value =
$1,000
Starting Interest Rate
4.37%
Coupon Rate =
3%
Coupon dates (Annual)
If interest rates change from 4.37% to 5.2% 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)

Bond Features
Maturity (years) =
9
Face Value =
$1,000
Starting Interest Rate
3.51%
Coupon Rate =
3%
Coupon dates (Annual)
If interest rates change from 3.51% to 6.96% immediately after
you buy the bond today (and stay at the new interest rate), what is
the price effect in year 6 ?
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)

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)

Bond Features
Maturity (years) =
8
Face Value =
$1,000
Starting Interest Rate
4.23%
Coupon Rate =
4%
Coupon dates (Annual)
If interest rates change from 4.23% to 5.02% 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)

Bond Features
Maturity (years) =
7
Face Value =
$1,000
Starting Interest Rate
3.01%
Coupon Rate =
4%
Coupon dates (Annual)
If interest rates change from 3.01% to 5.94% immediately after
you buy the bond today (and stay at the new interest rate), what is
the price effect in year 3 ?
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)

Bond Features
Maturity (years) =
8
Face Value =
$1,000
Starting Interest Rate
4.32%
Coupon Rate =
4%
Coupon dates (Annual)
If interest rates change from 4.32% to 6.72% 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)

Bond Features Maturity (years) = 6 Face Value = $1,000 Starting
Interest Rate 3.24% Coupon Rate = 4% Coupon dates (Annual) If
interest rates change from 3.24% to 6.66% immediately after you buy
the bond today (and stay at the new interest rate), what is the
price effect in year 6 ? 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)

Bond Features
Maturity (years) =
8
Face Value =
$1,000
Starting Interest Rate
4.23%
Coupon Rate =
4%
Coupon dates (Annual)
If interest rates change from 4.23% to 5.02% 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)

Bond Features
Maturity (years) =
6
Face Value =
$1,000
Starting Interest Rate
4.86%
Coupon Rate =
4%
Coupon dates (Annual)
If interest rates change from 4.86% to 5.66% 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)

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