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One year ago, XYZ Co. issued 19-year bonds at par. The bonds have a coupon rate...

One year ago, XYZ Co. issued 19-year bonds at par. The bonds have a coupon rate of 6.23 percent, paid semiannually, and a face value of $1,000. Today, the market yield on these bonds is 7.25 percent. What is the percentage change in the bond price over the past year? Answer to two decimals

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Answer #1
Price on the date of Issue
n = 38
I = 3.625%
Cashflows Amount PVF Present value
Semi annual (1000*6.23%*6/12) 31.15 20.45703 637.2365
Principal 1000 0.258433 258.433
Price at the date f issue 895.67
Price today (i.e. after one year)
n= 36
i= 3.625%
Cashflows Amount PVF Present value
Semi annual (1000*6.23%*6/12) 31.15 19.9308 620.8444
Principal 1000 0.277509 277.509
Price today (i.e. after one year) 898.35
Increasein price = 898.35 - 895.67 = 2.68
% increase in pricec = 2.68/ 895.67 *100 = 0.30%
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