You are a portfolio manager and responsible to manage bonds portfolio. One of your clients (John Smith) purchased a 30-year, 4.75% coupon bond that pays interest annually. The bond has a face value of $1,000. What is the change in the price of this bond if the market yield to maturity declines to 2.20% from the current rate of 4.50%? Please show all the calculations by which you came up with the final answer. Why did the 30-year bond price change? Please explain your reasoning.

You are a portfolio manager and responsible to manage bonds portfolio. One of your clients (John Smith) purchased a 30-year, 4.75% coupon bond that pays interest annually. The bond has a face value of $1,000. What is the change in the price of this bond if the market yield to maturity declines to 2.20% from the current rate of 4.50%? Please show all the calculations by which you came up with the final answer. Why did the 30-year bond price change? Please explain your reasoning.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter6: Fixed-income Securities: Characteristics And Valuation

Section: Chapter Questions

Problem 15P

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