A company issues a ten-year bond at par with a coupon rate of 6% paid semiannually. The YTM at the beginning of the third year of the bond (8 years left to maturity) is 7.8%. What was the percentage change in the price of the bond over the past two years?

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Quizplus · Accepted Answer

The bond was issued at par, meaning its initial price was 100% of face value. With the YTM increasing to 7.8%, the bond's price would have decreased. Using the bond price formula, the price change is approximately -10.56%.

A Company Issues a Ten-Year Bond at Par with a Coupon