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2. A $5,000 bond with a coupon rate of 5.1​% paid semiannually has ten years to...

2. A $5,000 bond with a coupon rate of 5.1​% paid semiannually has ten years to maturity and a yield to maturity of 6.7​%. If interest rates fall and the yield to maturity decreases by​ 0.8%, what will happen to the price of the​ bond?

A. fall by $277.36

B. rise by $277.36

C. fall by $332.83

D. rise by $332.83

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Homework Answers

Answer #1

Solution:-

Nper = 10 years * 2 = 20

PMT =

PMT = $127.50

Rate =

Rate = 3.35%

To Calculate Price of the Bond-

To Calculate Price of the Bond if interest rate is decreases by 0.80%-

Change in Price of Bond = $4,701.07 - $4,423.71

Change in Price of Bond = $277.36

Price of the Bond rises by $277.36

The Correct Answer is point B i.e. Rise by $277.36

If you have any query related to question then feel free to ask me in a comment.Thanks. Please Rate

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