Answer:
Explanation:
I think your question is missed of key information, allow me to add in and hope it will fit the original one.
<em>Both Bond Bill and Bond Ted have 9.4 percent coupons, make semiannual payments, and are priced at par value. Bond Bill has 5 years to maturity, whereas Bond Ted has 22 years to maturity. Both bonds have a par value of 1,000. If interest rates suddenly rise by 3 percent, what is the percentage change in the price of these bonds? </em>
My answer:
New yield will be = 9.4℅ + 3℅ = 12.4℅
Semi annual yield = 12.4/2 = 6.2℅
Nper: 5*2 =10
Coupon rate: 9.4%/2 = 4.7% semiannual
=> Coupon payment: 4.7%*1,000 = $47
Using present value formula in excel
pv=(rate,nper,pmt,fv)
pv= (6.2%, 10, 47, 1000)
pv= 890.64
=> Therefore, ℅ change =
(890.64 - 1000) / 1000 = -10.94%
New yield will be = 9.4℅ + 3℅ = 12.4℅
Semi annual yield = 12.4/2 = 6.2℅
Nper: 22*2 =44
Coupon rate: 9.4%/2 = 4.7% semiannual
=> Coupon payment: 4.7%*1,000 = $47
Using present value formula in excel
pv=(rate,nper,pmt,fv)
pv= (6.2%, 44, 47, 1000)
pv = $775.21
=> Therefore, ℅ change :
(775.21 - 1000) / 1000 = -22.47%