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Feliz [49]
3 years ago
10

8. You buy a 30-year zero coupon bond which will pay you $10,000 in 30 years at an annual yield of i=1% compounded once per year

. A few minutes later the annual yield rises to i=2% compounded once per year. What is the percent change in the value of the bond? (Hint: recall the formula for percent change. The answer should be negative.) 9. You buy a 30 year zero coupon bond which will pay you $1000 in 30 years at an annual yield of i=16.5% compounded once per year. 25 years later it will be a 5 year zero coupon bond. Suppose the interest rate on this bond will be 16.5%, what will the price of this bond be in 25 years?
Business
1 answer:
STALIN [3.7K]3 years ago
8 0

Answer:

-74.41%

465.9833221

Explanation:

The computation of percent change in the value of the bond is shown below:-

Price at 1% = $10,000 ÷ 1.01^30

= 7,419.23

Price at 2% = $10,000 ÷ 1.02^30

= 5,520.71

Percentage change in price = 5,520.71 ÷ 7,419.23

= -74.41%

The computation of the price of this bond be in 25 years is shown below:-

Price after 25 years: $1,000 ÷ 1.165^5

= 465.9833221

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