Question

What is the percentage change in price for a zero coupon bond if the yield changes from 6% to 7%? The bond has a face value of ​$1 comma 1,000 and it matures in 12 years. Use the price determined from the first​ yield, 66%, as the base in the percentage calculation.

Answer 1

Price of zero coupon bond = Present value of maturity amount
Step 1 :	Price at 6% yield
	PV= FV/(1+r)^n
	Where,
	FV= Future Value
	PV = Present Value
	r = Interest rate
	n= periods in number
	= $1000/( 1+0.06)^12
	=1000/2.0122
	= $496.97
Step2 :	Price at yield 7%
	PV= FV/(1+r)^n
	Where,
	FV= Future Value
	PV = Present Value
	r = Interest rate
	n= periods in number
	= $1000/( 1+0.07)^12
	=1000/2.25219
	= $444.01
Step 3 :	Percentage change in price
	=($444.01-496.97)/496.97
	=-10.66%