9-69 A $1,000 six-year Eurobond has an 8 percent coupon,is selling at par,and contracts to make annual payments of interest.The duration of this bond is 4.99 years.What will be the new price using the duration model if interest rates increase to 8.5 percent?

Question

Quizplus · Accepted Answer

The duration model estimates the change in bond price due to interest rate changes. With a 0.5% increase in rates, the price change is approximately -0.5% * 4.99 * $1,000 = -$23.10. Thus, the new price is $1,000 - $23.10 = $976.90.

9-69 a $1,000 Six-Year Eurobond Has an 8 Percent Coupon,is