Question
Bond Features Maturity (years) = 8 Face Value = $1,000 Starting Interest Rate 4.23% Coupon Rate...
|
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)
Homework Answers
Answer #1
Total term is 8 years. In year 4, remaining term to maturity is 4 years
Price effect in year 4= -$20.81 (loss)
Calculations as below:
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