Bond Features Maturity (years) = 6 Face Value = $1,000 Starting Interest Rate 3.28% Coupon Rate...

Bond Features Maturity (years) = 6 Face Value = $1,000 Starting Interest Rate 3.28% Coupon Rate = 5% Coupon dates (Annual) If interest rates change from 3.28% to 5.61% immediately after you buy the bond today (and stay at the new interest rate), what is the price effect in year 4 ? State your answer to the nearest penny (e.g., 48.45) If there is a loss, state your answer with a negative sign (e.g., -52.30)

Expert Solution

Present value of bond is as follows:

Resultant table:

2) value of bond at different interet rate is as follows:

Resultant table:

Hence, the value of bond decrease in 4th year by ($ 44.03)($1032.78-$988.75).

jeff jeffy answered 1 year ago

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