A bond has a duration of 7.5 years. Its current market price is $1,125. Interest rates in the market are 7 percent today. It has been forecasted that interest rates will rise to 9 percent over the next couple of weeks. How will the bond's price change in percentage terms? A. The bond's price will rise by 2 percent. B. The bond's price will fall by 2 percent. C. The bond's price will fall by 14.02 percent. D. The bond's price will rise by 14.02 percent.
A bond has a duration of 7.5 years. Its current market price is $1,125. Interest rates in the market are 7 percent today. It has been forecasted that interest rates will rise to 9 percent over the next couple of weeks. How will the bond's price change in percentage terms? A. The bond's price will rise by 2 percent. B. The bond's price will fall by 2 percent. C. The bond's price will fall by 14.02 percent. D. The bond's price will rise by 14.02 percent.
Chapter6: Bonds (debt) - Characteristics And Valuation
Section: Chapter Questions
Problem 14PROB
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A bond has a duration of 7.5 years. Its current market price is $1,125. Interest rates in the
market are 7 percent today. It has been
the next couple of weeks. How will the
A. The bond's price will rise by 2 percent.
B. The bond's price will fall by 2 percent.
C. The bond's price will fall by 14.02 percent.
D. The bond's price will rise by 14.02 percent.
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