A 6 percent coupon bond with 12 years left to maturity is priced to offer a 6.5 percent yield to maturity. You believe that in one year, the yield to maturity will be 6.25 percent. What is the change in price the bond will experience in dollars? (Assume semi-annual interest payments and $1,000 par value.)

Question

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The bond's price will increase as the yield to maturity decreases from 6.5% to 6.25%. Calculating the bond price at both yields and finding the difference gives the change in price.

A 6 Percent Coupon Bond with 12 Years Left to Maturity