Assume a three-year bond has a duration of 4.102 semi-annual compounding periods and a value of $105 991.21.Further,the yield on the bond instantaneously increases from 6.5% to 6.7%.What is the proportional decrease in the bond price?

A) $ \$ 417.24 $
B) $ \$ 421.09 $
C) $ \$ 437.61 $
D) $ \$ 499.43 $

Question

Assume a three-year bond has a duration of 4.102 semi-annual compounding periods and a value of $105 991.21.Further,the yield on the bond instantaneously increases from 6.5% to 6.7%.What is the proportional decrease in the bond price?

A) $ \$ 417.24 $
B) $ \$ 421.09 $
C) $ \$ 437.61 $
D) $ \$ 499.43 $

Quizplus · Accepted Answer

As demonstrated in examples 6.7 and 6.8,we can find the proportional decrease in the bond price using the following: {[(0.067/2)- (0.065/2)]/(1 + 0.065/2)} F1F1F1S1F1F1F10 4.102 F1F1F1S1F1F1F10 105991.21 = $421.09.

Assume a Three-Year Bond Has a Duration of 4 $417.24 \$ 417.24 $417.24

Assume a Three-Year Bond Has a Duration of 4 $\$ 417.24$