A 12-year, 5% coupon bond pays interest annually. The bond has a face value of $1,000.__________ Fill in the blank, read surroun

Question

3 years ago

15

ding text. % is the percentage change in the price of this bond if the yield to maturity rises to 6% from the current yield to maturity of 4.5%

1 answer:

Nata [24] · Answer 1 · 2022-01-16T23:27:29+03:00

Answer:

12.38% decrease

Explanation:

Given the following parameters

6%

Number of years = 12

Market yield I= 6 === 4.5

Present Value = 916.16 == 1045.59

PMT (annuity payment) = 50 (5%x1000)

Future value = 1000

Therefore, to solve for the percentage change, we have in the price of this bond in this situation, we have (916.16-1045.59) / 1045.59 = -0.1238

Hence, 12.38% decrease is the percentage change in the price of this bond if the market yield rises to 6% from the current yield of 4.5%,