Consider the following coupon bond issued by XYZ.inc Term: 3 years Payment: 75 Face Value: 1,000 Currently the prevailing risk free rate is 0.02 and the market places a risk premium on XYZ.inc bonds of 0.02 Suppose the risk premium decreases by 0.02 Compute the change in the bond price.

Consider the following coupon bond issued by XYZ.inc Term: 3 years Payment: 75 Face Value: 1,000 Currently the prevailing risk free rate is 0.02 and the market places a risk premium on XYZ.inc bonds of 0.02 Suppose the risk premium decreases by 0.02 Compute the change in the bond price.

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter5: The Cost Of Money (interest Rates)

Section: Chapter Questions

Problem 20PROB

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Question

Consider the following coupon bond issued by XYZ.inc
Term: 3 years
Payment: 75
Face Value: 1,000
Currently the prevailing risk free rate is 0.02 and the market places a risk premium
on XYZ.inc bonds of 0.02
Suppose the risk premium decreases by 0.02
Compute the change in the bond price.
Record your unitless answer to the nearest cent.
Your Answer:

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