How much would an investor lose if she purchased a 30-year zero-coupon bond with a $1,000 par value and 10% yield to maturity, only to see market interest rates increase to 12 percent one year later? (Hint: How much would the price change from a year earlier?)

Question

Quizplus · Accepted Answer

The price of the bond would decrease from $385.54 to $365.61, resulting in a loss of $19.93.

How Much Would an Investor Lose If She Purchased a 30-Year