The Corner Grocer has a 7-year, 6 percent annual coupon bond outstanding with a $1,000 par value. The bond has a yield to maturity of 5.5 percent. Which one of the following statements is correct if the market yield suddenly increases to 6.5 percent?
A) The bond price will increase by $57.14.
B) The bond price will increase by 5.29 percent.
C) The bond price will decrease by $53.62.
D) The bond price will decrease by 5.43 percent.
E) The bond price will decrease by 5.36 percent.
Correct Answer:
Verified
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