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A bond has a coupon rate of 8 percent, 7 years to maturity, semiannual interest payments,...

A bond has a coupon rate of 8 percent, 7 years to maturity, semiannual interest payments, and a YTM of 7 percent. If interest rates suddenly rise by 1.5 percent, what will be the percentage change in the bond price? Use Excel

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Expert Solution

earlier bond price using excel=pv(rate,nper,pmt,fv)

=pv(7%/2,7*2,-1000*8%/2,-1000)

=1054.60

new bond price using excel=pv(rate,nper,pmt,fv)

=pv(8.5%/2,7*2,-1000*8%/2,-1000)

=974.02

what will be the percentage change in the bond price=974.02/1054.60-1=-7.64%

jeff jeffy answered 2 years ago
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