Question

# A. Bond Features Maturity (years) = 10 Face Value = \$1,000 Starting Interest Rate 4.98% Coupon...

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 (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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