Question

So since the bond was issued a year ago at a 13 year bond since a year had gone by it now is 12 years left but since the bond is paid semiannually we multiple it by 2 and get 24. The coupon rate is 6.25% but since it is paid semiannually we divide it by 2. Par is still 1000. The current YTM is 7.68 but it is still semiannual so we need to divide that by 2. We need to find the difference between the two.

"One year ago, XYZ Co. issued 13-year bonds at par. The bonds have a coupon rate of 6.25 percent, paid semiannually, and a face value of $1,000. Today, the market yield on these bonds is 7.68 percent. What is the percentage change in the bond price over the past year? "

Answer 1

K = Nx2

Bond Price =∑ [( Coupon)/(1 + YTM/2)^k]     +   Par value/(1 + YTM/2)^Nx2

k=1

K =12x2

Bond Price =∑ [(6.25*1000/200)/(1 + 7.68/200)^k]     +   1000/(1 + 7.68/200)^12x2

k=1

Bond Price = 889.18

%age change in price =(New price-Old price)*100/old price

%age change in price = (889.18-1000)*100/1000

= -11.08%