You own a bond that has a duration of 6 years. Interest rates are currently 7%, but you believe the Fed is about to increase interest rates by 21 basis points. Your predicted price change on this bond is (Select the closest answer.) Multiple Choice +1.18% −1.18% -5.61% +5.61%

You own a bond that has a duration of 6 years. Interest rates are currently 7%, but you believe the Fed is about to increase interest rates by 21 basis points. Your predicted price change on this bond is (Select the closest answer.) Multiple Choice +1.18% −1.18% -5.61% +5.61%

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 11P

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Concept explainers

Bond Valuation

Bond valuation are the notes issued by the corporation to raise long-term funds for the business. The corporations are required to pay the interest on such liabilities at a specified rate of interest (termed as coupon rate) at specified dates which may be on semi-annual or annual basis. These interest payments may be in the form of coupons.

Question

You own a bond that has a duration of 6 years. Interest rates are currently 7%, but
you believe the Fed is about to increase interest rates by 21 basis points. Your
predicted price change on this bond is
Choice +1.18% -1.18% -5.61% +5.61%
.. (Select the closest answer.) Multiple

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