Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. what is the percentage price change for a zero cou

What is the percentage price change for a zero coupon bond if its YTM changes from...

Free

50.1K

Verified Solution

Question

Finance

What is the percentage price change for a zero coupon bond ifits YTM changes from 3.9% to 4.6%? The bond's face value is $1,000and it matures in 8 years. Use the price determined from the firstyield, 3.9%, as the base in the percentage calculation. Round tothe nearest tenth of a percent. (e.g., 4.32% = 4.3). ?[Hint: If theprice dropped, enter a negative number].

Answer & Explanation Solved by verified expert
4.4 Ratings (964 Votes)

Current price
Bond
                  K = N
Bond Price =? [( Coupon)/(1 + YTM)^k]     +   Par value/(1 + YTM)^N
                   k=1
                  K =8
Bond Price =? [(0*1000/100)/(1 + 3.9/100)^k]     +   1000/(1 + 3.9/100)^8
                   k=1
Bond Price = 736.34
Change in YTM =0.7
Bond
                  K = N
Bond Price =? [( Coupon)/(1 + YTM)^k]     +   Par value/(1 + YTM)^N
                   k=1
                  K =8
Bond Price =? [(0*1000/100)/(1 + 4.6/100)^k]     +   1000/(1 + 4.6/100)^8
                   k=1
Bond Price = 697.82
%age change in price =(New price-Old price)*100/old price
%age change in price = (697.82-736.34)*100/736.34
= -5.23%

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

What is the percentage price change for a zero coupon bond ifits YTM changes from 3.9% to 4.6%? The bond's face value is $1,000and it matures in 8 years. Use the price determined from the firstyield, 3.9%, as the base in the percentage calculation. Round tothe nearest tenth of a percent. (e.g., 4.32% = 4.3). ?[Hint: If theprice dropped, enter a negative number].

Other questions asked by students

Statistics
1.2K views

The average income tax refund for the 2009 tax year was ​$3109. Assume the refund per...

Physics
1.2K views

A proton starts on a plate with potential of 5.0 x 10^3 V at y=0m. It...

Biology
1.2K views

Match the following symptoms and signs to their causes Symptom resulting from Patient X s...

Geometry
1.2K views

8 ed out of Given the graph 10 19 TURI 7 19 19 Find the...

Basic Math
1.2K views

Write the trigonometric form of the complex number. (Round your angles to two decimal places....

Basic Math
1.2K views

The science club at a large middle school has 25 members The members want to...

Algebra
1.2K views

What is the sixth term of a geometric sequence in which the first term is...

Accounting
1.2K views

Puget Sound Divers is a company that provides diving services such...

Accounting
1.2K views

You are evaluating an investment project, Project XX, with the following cash flows: ...

Accounting
1.2K views

For the current year, Furniture Company incurred the following: Month...

Accounting
1.2K views

Fogerty Company makes two products-titanium Hubs and Sprockets. Data regarding the two products follow: ...

Accounting
1.2K views

A company that uses the period inventory system records a purchase of inventory twice but...