# Analyzing the impact of interest rate change on prices

Interest Rate Sensitivity

A bond trader purchased each of the following bonds at a yield to maturity of 9%. Immediately after she purchased the bonds, interest rates fell to 5%. What is the percentage change in the price of each bond after the decline in interest rates? Fill in the following table. Round your answers to two decimal places.

Price @ 9% Price @ 5% Percentage Change

10-year, 10% annual coupon $ $ %

10-year zero %

5-year zero %

30-year zero %

$100 perpetuity %

https://brainmass.com/business/dividends-stock-repurchase-and-policy/analyzing-impact-interest-rate-change-prices-573683

#### Solution Preview

A bond trader purchased each of the following bonds at a yield to maturity of 9%. Immediately after she purchased the bonds, interest rates fell to 5%. What is the percentage change in the price of each bond after the decline in interest rates? Fill in the following table.

1) 10-year, 10% annual coupon

Face value of bond=M=$1000

Coupon amount=C=1000*10%=$100

Number of periods=n=10

YTM=r=9%

Price of ...

#### Solution Summary

This solution depicts the steps to calculate the price changes due to variation in interest rate for the given cases.