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erastova [34]
2 years ago
12

A 30-year maturity bond making annual coupon payments with a coupon rate of 12% has (Macauley) duration of 11.54 years and conve

xity of 192.4. The bond currently sells at a yield to maturity of 8%. a) Find the price of the bond if ytm falls to 7% (use financial calculator or spreadsheet).
Business
1 answer:
dsp732 years ago
7 0

The price of the bond if the yield to maturity falls to 7%, based on the period and amount will be $1,620.45.

<h3>What is the price of the bond at 7%?</h3>

We shall assume that the bond has a face value of $1,000.

The coupon is:

= 12% x 1,000

= $120

The price is:
= (Coupon x Present value interest factor of annuity, 30 years, 7%) + Face value of bond / ( 1 + rate) ^ number of periods

= (120 x 12.409) + (1,000 / (1 + 7%)³⁰)

= $1,620.45

Find out more on bond pricing at brainly.com/question/25596583.

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