Question

In: Finance

Bond A pays 8.8 % coupons and is priced at par value. It has 2 years...

Bond A pays 8.8 % coupons and is priced at par value. It has 2 years to maturity. If interest rates suddenly rise by 1.4%, what is the percentage change in price of Bond A? What is the now the price of Bond A?

Expert Solution

New Price of Bond is $ 975.77 with the percentage change in the price of bond by -2.42%

A bond has face value of $ 1,000. When bonds are priced at par then it means that price of bond is equal to its face value.

So, current price of bond is $1,000.

Further, when bonds are price at par, Yield to maturity(YTM) and coupon rate is also same.

YTM rate is used to discount cash flows from bond.

# 1

Changed price of bond

=

=-pv(rate,nper,pmt,fv)

Where,

=

$ 975.77

rate

=

Discount rate

=

10.20%

nper

=

Time

=

2

pmt

=

Coupon Payment

=

$ 88

fv

=

Maturity value

=

$ 1,000

# 2

Percentage change in price of bond

=

(b-a)/a

Where,

=

-2.42%

a

=

Existing price

=

$ 1,000

b

=

Changed rice

=

$ 975.77

jeff jeffy answered 1 year ago

Both Bond A and Bond B have 8.8 percent coupons and are priced at par value....

Both Bond A and Bond B have 8.8 percent coupons and are priced at par value. Bond A has 9 years to maturity, while Bond B has 18 years to maturity. a. If interest rates suddenly rise by 1.4 percent, what is the percentage change in price of Bond A and Bond B? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) %Δ...

Both Bond A and Bond B have 7 % coupons, are priced at par value, and...

Both Bond A and Bond B have 7 % coupons, are priced at par value, and make semiannual payments. Bond A has 5 years to maturity, whereas Bond B has 15 years to maturity. A) If interest rates suddenly rise by 4 percent, what is the percentage change in the price of Bond A? B) If interest rates suddenly rise by 4 percent, what is the percentage change in the price of Bond B? C) If rates were to suddenly...

A German bond that pays annual coupons of 4.5%, has a par value of €1,000, and...

A German bond that pays annual coupons of 4.5%, has a par value of €1,000, and a YTM of 3.9%. Assuming there are 19 years until maturity, what is the current price of this bond?

Both Bond A and Bond B have 7.8 percent coupons and are priced at par value....

Both Bond A and Bond B have 7.8 percent coupons and are priced at par value. Bond A has 9 years to maturity, while Bond B has 16 years to maturity. a. If interest rates suddenly rise by 2.2 percent, what is the percentage change in price of Bond A and Bond B? Bond A = _______ %Bond B = _______ %b. If interest rates suddenly fall by 2.2 percent instead, what would be the percentage change in price of Bond A...

Both Bond A and Bond B have 7.1 percent coupons and are priced at par value....

Both Bond A and Bond B have 7.1 percent coupons and are priced at par value. Bond A has 8 years to maturity, while Bond B has 19 years to maturity. If interest rates suddenly rise by 2 percentage points, what is the difference in percentage changes in prices of Bond A and Bond B? (i.e., Bond A - Bond B). The bonds pay coupons twice a year. (A negative value should be indicated by a minus sign. Do not...

Both Bond A and Bond B have 8 percent coupons and are priced at par value....

Both Bond A and Bond B have 8 percent coupons and are priced at par value. Bond A has 5 years to maturity, while Bond B has 18 years to maturity. a. If interest rates suddenly rise by 2.4 percent, what is the percentage change in price of Bond A and Bond B? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) b....

Both Bond A and Bond B have 7.4 percent coupons and are priced at par value....

Both Bond A and Bond B have 7.4 percent coupons and are priced at par value. Bond A has 7 years to maturity, while Bond B has 18 years to maturity. If interest rates suddenly rise by 1 percentage points, what is the difference in percentage changes in prices of Bond A and Bond B? (i.e., Bond A - Bond B). The bonds pay coupons twice a year. (A negative value should be indicated by a minus sign. Do not round...

Both Bond A and Bond B have 7.2 percent coupons and are priced at par value....

Both Bond A and Bond B have 7.2 percent coupons and are priced at par value. Bond A has 6 years to maturity, while Bond B has 16 years to maturity. a. If interest rates suddenly rise by 1.6 percent, what is the percentage change in price of Bond A and Bond B? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) b....

Both Bond A and Bond B have 7 percent coupons and are priced at par value....

Both Bond A and Bond B have 7 percent coupons and are priced at par value. Bond A has 7 years to maturity, while Bond B has 18 years to maturity. If interest rates suddenly rise by 2 percentage points, what is the difference in percentage changes in prices of Bond A and Bond B? (i.e., Bond A - Bond B). The bonds pay coupons twice a year. (A negative value should be indicated by a minus sign. Do not round...

A 100 par bond pays semiannual coupons at 8%. Bond priced to yield 6% comp semiannually....

A 100 par bond pays semiannual coupons at 8%. Bond priced to yield 6% comp semiannually. Bond matures on 6/1/08 and is purchased on 10/1/03.Find full price on 10/1/03. Use 30/360