A 16-year, 4.5 percent coupon bond pays interest annually. The bond has a face value of $1,000. What is the percentage change in the price of this bond if the market yield to maturity rises to 5.7 percent from the current rate of 5.5 percent?© BrainMass Inc. brainmass.com October 25, 2018, 8:35 am ad1c9bdddf
This problem is a bond problem, where the bond pays annual coupon payments. First you need to find the current price using the 5.5% market rate, then find the current price using the new 5.7% rate, and finally, compare the two prices and calculate the percentage change.
I have used a HP 10BII financial calculator; if you are using another financial calculator, you may need to adjust the inputs accordingly. You will find the current price of the bond using the following inputs into the ...
This solution shows with detailed calculations, what happens to bond prices when the market interest rate changes. The current prices of the bond have been calculated using a financial calculator. The solution also includes an explanation on how to calculate a percentage change in price.
Bond price changes; holding period yield; bank discount rate
Suppose a 10-year bond is issued with an annual coupon rate of 8 percent when the market rate of interest is also 8 percent. If the market rate rises to 9 percent, what happens to the price of this bond? What happens to the bond's price if the market rate falls to 6 percent? Explain why.
An investor is interested in purchasing a new 20-year government bond carrying a 10 percent annual coupon rate with interest paid twice a year. The bond's current market price is $875 for a $1,000 par value instrument. If the investor buys the bond at the going price and holds to maturity, what will be his or her yield to maturity? Suppose the investor sells the bond at the end of 10 years for $950. What is the investor's holding-period yield?
Calculate the bank discount rate of return (DR) and the YTM-equivalent return for the following money market instruments:
A. Purchase price, $96; par value, $100; maturity, 90 days.View Full Posting Details