Question

In early April 2020 Australian 10-year government bonds were trading at a yield-to-maturity of 0.80% p.a., compounding semi-annually. The bonds have a coupon rate of 2.50% p.a., paid semi-annually. Suppose that in one year’s time 10-year Australian Government bonds (also with a coupon rate of 2.50% p.a., paid semi-annually), are trading at a yield-to-maturity of 1.30% p.a., paid semi-annually. The percentage change in the price of 10-year government bonds over this one year will be

Select one: a. 4.4% b. 5.4% c. 2.4% d. 3.4%

Answer 1