Question

14. How much would be the loss in price if an investor purchased a 15-year bond with a $1,000 par value, a 6% coupon paid annually and a 7% yield to maturity at the beginning, only to see market interest rates increase to 15% one year later?

-$339.30

-$424.12

-$296.89

-$466.54

Answer #1

Face value | $1,000 |

Coupon rate | 6% |

Coupon payment | $60 |

Years to maturity at purchase | 15 |

Yield to maturity at purchase | 7% |

Purchase price |
$908.92 |

Years to maturity one year later | 14 |

Yield to maturity one year later | 15% |

The price one year later |
$484.80 |

Loss |
-$424.12 |

Excel formulas:

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