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1. Bond Features Maturity (years) = 9 Face Value = $1,000 Starting Interest Rate 4.89% Coupon...

1.

Bond Features
Maturity (years) =	9
Face Value =	$1,000
Starting Interest Rate	4.89%
Coupon Rate =	3%
Coupon dates (Annual)

If interest rates change from 4.89% to 5.48% immediately after you buy the bond today (and stay at the new interest rate), what is the price effect in year 5 ?

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)

2.

Bond Features
Maturity (years) =	7
Face Value =	$1,000
Starting Interest Rate	4.04%
Coupon Rate =	4%
Coupon dates (Annual)

If interest rates change from 4.04% to 6.11% 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

Q#1: Total term is 9 years. In year 5, remaining term to maturity is 4 years

Price effect in year 5= $48.03

Calculations as below:

Q#2: Total term is 7 years. In year 3, remaining term to maturity is 3 years

Price effect in year 4= -$53.89 (loss)

Calculations as below:

jeff jeffy answered 2 years ago

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