Consider a 10.80 percent coupon bond with seven years to maturity and a current

Question

Consider a 10.80 percent coupon bond with seven years to maturity and a current price of $979.20. Suppose the yield on the bond suddenly increases by 2 percent.

Use duration to estimate the new price of the bond. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Calculate the new bond price. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Consider a 10.80 percent coupon bond with seven years to maturity and a current price of $979.20. Suppose the yield on the bond suddenly increases by 2 percent.

Explanation / Answer

Considering FV of 1000 , Coupon =108 Year Cash flow Cell 0 -979.2 A1 1 108 A2 2 108 A3 3 108 A4 4 108 A5 5 108 A6 6 108 A7 7 108 A8 7 1000 A9 Yield using excel formulae=IRR(A1:A9,0.01)=10% New Yield=10+2=12% Year Cash flow PV@12% 1 108 96.43 2 108 96.43 3 108 96.43 4 108 96.43 5 108 96.43 6 108 96.43 7 108 96.43 7 1000 892.86 Price=Sum of cash flow 1567.86

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.