A ten-year annual pay bond with a 5% coupon rate is trading with a market yield...

A ten-year annual pay bond with a 5% coupon rate is trading with a market yield of 7.75%. What is the percentage change in price if the market yield decreases by 75 basis points immediately after the bond is issued?

Solutions

Expert Solution

Bond price with market yield of 7.75%

FV = 1,000

n = 10

cpn = 1,000 * 0.05 = 50

r = 0.0775

Bond price with market yield of 7.75% - 0.75% = 7%

r = 7% = 0.07

FV = 1,000

n = 10

cpn = 1,000 * 0.05 = 50

The bond price increases by (859.5283692061 - 813.3737661165) = $46.1546030896 when the market yield decreases by 75 basis points

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

Consider a ten-year, $1000 bond with a 6% coupon rate and annual coupons is trading with...

Consider a ten-year, $1000 bond with a 6% coupon rate and annual coupons is trading with a YTM of 6%. Its bond price is $____

Suppose a ten-year, $1000 bond with an 8.7% coupon rate and semi-annual coupons is trading for...

Suppose a ten-year, $1000 bond with an 8.7% coupon rate and semi-annual coupons is trading for a price of $1 034.59. a. What is the bond's yield to maturity (expressed as an APR with semi-annual compounding)? b. If the bond's yield to maturity changes to 9.3% APR, what will the bond's price be?

Suppose a ten-year bond $1,000 bond with a 5% coupon rate that pays annual coupons is...

Suppose a ten-year bond $1,000 bond with a 5% coupon rate that pays annual coupons is initially trading at par (at $1,000). After 5 years time, the bond’s yield to maturity falls to 4%. If you sell the bond after 5 years, what price will you receive

A ten year bond has a coupon rate of 7% and a yield to maturity of...

A ten year bond has a coupon rate of 7% and a yield to maturity of 9%, will you be willing to pay $1100 for this bond. Please explain.

You own a 10-year bond paying an annual coupon rate of 5%. The yield to maturity...

You own a 10-year bond paying an annual coupon rate of 5%. The yield to maturity on the bond is 7%. The face value, as usual, is $1000. What is the value of the bond today?

Suppose a ten-year, $1,000 bond with an 8.3% coupon rate and semiannual coupons is trading for...

Suppose a ten-year, $1,000 bond with an 8.3% coupon rate and semiannual coupons is trading for $1,034.16. a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? b. If the bond's yield to maturity changes to 9.8% APR, what will be the bond's price?

Suppose a ten-year, $1,000 bond with an 8.5% coupon rate and semiannual coupons is trading for...

Suppose a ten-year, $1,000 bond with an 8.5% coupon rate and semiannual coupons is trading for $1,034.79. a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? b. If the bond's yield to maturity changes to 9.4% APR, what will be the bond's price?

Suppose a ten-year, $1,000 bond with an 8.7% coupon rate and semiannual coupons is trading for...

Suppose a ten-year, $1,000 bond with an 8.7% coupon rate and semiannual coupons is trading for $1,035.67. a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? b. If the bond's yield to maturity changes to 9.7% APR, what will be the bond's price? nothing%. (Round to two decimal places.)

Suppose a ten-year, $1,000 bond with an 8.8% coupon rate and semiannual coupons is trading for...

Suppose a ten-year, $1,000 bond with an 8.8% coupon rate and semiannual coupons is trading for $1,035.09. a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? b. If the bond's yield to maturity changes to 9.7% APR, what will be the bond's price? a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)?

Suppose a ten-year, $1,000 bond with an 8.4% coupon rate and semiannual coupons is trading for...

Suppose a ten-year, $1,000 bond with an 8.4% coupon rate and semiannual coupons is trading for $1,034.17. a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? b. If the bond's yield to maturity changes to 9.7% APR, what will be the bond's price? Suppose a five-year, $1,000 bond with annual coupons has a price of $896.48 and a yield to maturity of 6.3%. c. What is the bond's coupon rate?

Subjects