An 8%,15-year bond has a yield to maturity of 10% and a duration of 8.05 years.If the market yield changes by 25 basis points,how much change will there be in the bond's price?
A) 1.85%
B) 2.01%
C) 3.27%
D) 6.44%
E) none of these

Question

Quizplus · Accepted Answer

The change in bond price can be estimated using the formula: Change in Price ≈ -Duration × Change in Yield. Here, Duration = 8.05 years and Change in Yield = 0.0025 (25 basis points). Thus, Change in Price ≈ -8.05 × 0.0025 = -0.020125 or approximately -2.01%.

An 8%,15-Year Bond Has a Yield to Maturity of 10