A corporate bond has 2 years to maturity, a coupon rate of 6%, a face value...

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Finance

A corporate bond has 2 years to maturity, a coupon rate of 6%, aface value of $1,000 and pays coupons semiannually. The marketinterest rate for similar bonds is 7.5%.
What is the price of the bond (in $)?
What is the bond's duration in years?
If yields fall by 0.8 percentage points, what is the newexpected bond price based on its duration (in $)?
What is the actual bond price after the change in yields (in$)?
What is the difference between the two new bond prices (inabsolute $)?

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4.0 Ratings (727 Votes)

Duration measured in years which says how longit will be before a bonds purchase price repaid in present See Answer

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A corporate bond has 2 years to maturity, a coupon rate of 6%, aface value of $1,000 and pays coupons semiannually. The marketinterest rate for similar bonds is 7.5%.What is the price of the bond (in $)?What is the bond's duration in years?If yields fall by 0.8 percentage points, what is the newexpected bond price based on its duration (in $)?What is the actual bond price after the change in yields (in$)?What is the difference between the two new bond prices (inabsolute $)?