What is the price of the bond? b. If the rate of interest increases 1 percent, what will be the bond’s new price? c. Using your answers to parts (a) and (b), what is the percentage change in the bond’s price as a result of the 1 percent increase in interest rates? (Negative value should be indicated by a minus sign.)
What is the price of the bond? b. If the rate of interest increases 1 percent, what will be the bond’s new price? c. Using your answers to parts (a) and (b), what is the percentage change in the bond’s price as a result of the 1 percent increase in interest rates? (Negative value should be indicated by a minus sign.)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter4: Bond Valuation
Section: Chapter Questions
Problem 5MC: What would be the value of the bond described in Part d if, just after it had been issued, the...
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Question
Consider a(n) Ten-year, 14.5 percent annual coupon bond with a face value of $1,000. The bond is trading at a rate of 11.5 percent.
a. What is the price of the bond?
b. If the rate of interest increases 1 percent, what will be the bond’s new price?
c. Using your answers to parts (a) and (b), what is the percentage change in the
d. Repeat parts (b) and (c) assuming a 1 percent decrease in interest rates.
(For all requirements, do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16))
a. | Price of the bond | ||
b. | Bond's new price | ||
c. | Percentage change | % | |
d. | Bond's new price | ||
Percentage change | % |
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