An analyst observes a 20-year, 8% option-free bond with semi-annual coupons. The required semiannual-pay yield to maturity on this bond was 8%, but suddenly it drops to 7.25%. The percentage change in the price of this bond when the rate decreased is closest to: A. 7.86% B. 7.79% C. 8.00%.
An analyst observes a 20-year, 8% option-free bond with semi-annual coupons. The required semiannual-pay yield to maturity on this bond was 8%, but suddenly it drops to 7.25%. The percentage change in the price of this bond when the rate decreased is closest to: A. 7.86% B. 7.79% C. 8.00%.
Chapter14: Investing In Stocks And Bonds
Section: Chapter Questions
Problem 6DTM
Related questions
Question
An analyst observes a 20-year, 8% option-free bond with semi-annual coupons. The required semiannual-pay yield to maturity on this bond was 8%, but suddenly it drops to 7.25%.
- The percentage change in the price of this bond when the rate decreased is closest to:
A. 7.86%
B. 7.79%
C. 8.00%.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT