9-103 Calculate the percentage change in this bond's price if interest rates on comparable risk securities decline to 7 percent.Use the duration valuation equation.

Question

Quizplus · Accepted Answer

Using the duration valuation equation, the percentage change in bond price can be calculated as:

Percentage change in bond price = (-duration x change in yield) / (1 + yield)

Here, the duration of the bond is not given, so we cannot calculate it exactly. However, we can assume a duration of 8 years based on the information provided in question 9-102.

Thus, the percentage change in bond price = (-8 x (0.09 - 0.07)) / (1 + 0.07) = +11.52%

Therefore, the answer is E, which is +11.52%.

9-103 Calculate the Percentage Change in This Bond's Price If