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

70.2K

Verified Solution

Question

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

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

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