Question
In: Finance
What is the percentage change in price for a zero coupon bond if the yield changes...
What is the percentage change in price for a zero coupon bond if the yield changes from 8.5% to 8%? The bond has a face value of $1,000 and it matures in 15 years. Use the price determined from the first yield, 8.5%, as the base in the percentage calculation. The percentage change in the bond price if the yield changes from 8.5% to 8% is ____%. (Round to two decimal places.)
Solutions
Expert Solution
We determine the initial price and changed price using excel PV function. The dollar change in price= New price- Old price.
Percentage change in price = Change in price/ Original price
= 7.7%
| Initial price | ($294.14) |
| Price after change in interest rate | ($315.24) |
| Change in bond price | $21.10 |
| Percentage change | 7.17% |
WORKINGS
jeff jeffy answered 1 year agoRelated Solutions
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Year
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Zero-coupon bond price
1-year implied forward rate
Par coupon rate
1
5%
a
2
b
c
d
6%
Please find out the values of a,b,c and d.
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