You own a bond that pays a 12% annualized SEMIANNUAL coupon rate and has 10 years to maturity.If the discount rate increases from 14% to 16% during the next two years of the bonds life,then what is the dollar increase (decrease)in value for the bond during the two year period?

Question

Quizplus · Accepted Answer

Price before: 60PVIFA(7%,20)+ 1000PVIF(7%,20)= 894.06
Price after 2 years: 60PVIFA(8%,16)+ 1000PVIF(8%,16)= 822.97
Difference: Price after 2 years - Price before = 822.97 - 894.06 = -71.09

You Own a Bond That Pays a 12% Annualized SEMIANNUAL