You find a bond with 28 years until maturity that has a coupon rate of 10.5 perc
ID: 2726360 • Letter: Y
Question
You find a bond with 28 years until maturity that has a coupon rate of 10.5 percent and a yield to maturity of 10 percent. Suppose the yield to maturity on the bond increases by .25 percent.
What is the new price of the bond using duration? (Do not round intermediate calculations. Round your answers to 2 decimal places. Omit the "$" sign in your response.)
What is the new price of the bond if the yield to maturity increases by 1 percent? (Do not round intermediate calculations. Round your answers to 2 decimal places. Omit the "$" sign in your response.)
1.
What is the new price of the bond using duration? (Do not round intermediate calculations. Round your answers to 2 decimal places. Omit the "$" sign in your response.)
Explanation / Answer
Answer:1 Price if YTM is 10%
Bond Price=$105*PVIFA(10%,28)+$1000*PVIF(10%,28)
=1046.53
Price if YTM is 10.25%
Bond Price=$105*PVIFA(10.25%,28)+$1000*PVIF(10.25%,28)
=1022.8
Answer:2
Price if YTM is 10%
Bond Price=$105*PVIFA(10%,28)+$1000*PVIF(10%,28)
=1046.53
Price if YTM is 11%
Bond Price=$105*PVIFA(11%,28)+$1000*PVIF(11%,28)
=956.99
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.