A $50 000 bond has a term to maturity of 20 years with half-yearly coupons set at 7% p.a.Calculate the change in bond price if the yield changes from 8.5% to 8%.
A) $ -\$ 1625.42 $
B) $ -\$ 1586.81 $
C) $ \$ 1587.81 $
D) $ \$ 1625.42 $

Question

Quizplus · Accepted Answer

Use equation 6.4,with a face value of $100 000,40 coupon payments of $1750 each,a yield of 4.25% per period.This gives a bond price of $45 014.61.At the new yield of 4% per period,the price is $46 602.42.The price change is therefore $46602.42 - $45014.61 = $1587.81.

A $50 000 Bond Has a Term to Maturity of 20