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A bond is scheduled to mature in five years. Its coupon rate is 9 percent with...

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Finance

A bond is scheduled to mature in five years. Its coupon rate is9 percent with interest paid annually. This $1,000 par value bondcarries a yield to maturity of 10 percent.

Calculate the percentage change in this bond's price if interestrates on comparable risk securities increase to 11 percent. Use theduration valuation equation.

+4.25 percent

-4.25 percent

+8.58 percent

-3.93 percent

-3.84 percent

Answer & Explanation Solved by verified expert
3.7 Ratings (342 Votes)
K NBond Price Coupon1 YTMk Par value1 YTMNk1K 5Bond Price 910001001 10100k 10001 101005k1Bond Price 96209PeriodCash FlowDiscounting    See Answer
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Transcribed Image Text

A bond is scheduled to mature in five years. Its coupon rate is9 percent with interest paid annually. This $1,000 par value bondcarries a yield to maturity of 10 percent.Calculate the percentage change in this bond's price if interestrates on comparable risk securities increase to 11 percent. Use theduration valuation equation.+4.25 percent-4.25 percent+8.58 percent-3.93 percent-3.84 percent

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