A 12-year, 8 percent bond with a YTM of 12 percent has a Macaulay duration of 9.5 years. If interest rates decline by 50 basis points, what will be the percent change in price for this bond?

Question

Quizplus · Accepted Answer

The percent change in price can be estimated using the formula: -Duration * (Change in yield). Here, -9.5 * (-0.005) = +4.75%. However, since the choices are close, the closest option is +4.48 percent.

A 12-Year, 8 Percent Bond with a YTM of 12