Question

A 13-year, 6 percent coupon bond pays interest semiannually. The bond has a face value of $1,000. What is the percentage change in the price of this bond if the market yield to maturity rises to 5.7 percent from the current rate of 5.5 percent?

Answer #1

**-1.79%**

Current Price | =-pv(rate,nper,pmt,fv) | Where, | ||||||

= $ 1,046.01 | rate | = | 5.5%/2 | = | 0.0275 | |||

nper | = | 13*2 | = | 26 | ||||

pmt | = | 1000*6%*1/2 | = | $ 30.00 | ||||

fv | = | $ 1,000.00 | ||||||

Changed Price | =-pv(rate,nper,pmt,fv) | Where, | ||||||

= $ 1,027.28 | rate | = | 5.7%/2 | = | 0.0285 | |||

nper | = | 13*2 | = | 26 | ||||

pmt | = | 1000*6%*1/2 | = | $ 30.00 | ||||

fv | = | $ 1,000.00 | ||||||

Percentage change in the price of bond | = | (P1-P0)/P0 | Where, | |||||

= |
-1.79% |
P0 | = | Existing Price | = | $ 1,046.01 | ||

P1 | = | Changed Price | = | $ 1,027.28 |

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