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Solution Library
Calculate Change In Bond Price With Change In Market Interest Rates
Question
Consider a six-year maturity, $100,000 face value bond that pays a 5 percent fixed coupon annually.
1. What is the price of the bond if market interest rates are 4 percent?
a. $105,816.44.
b. $105,287.67.
c. $105,242.14.
d. $100,000.00.
e. $106,290.56.
2. What is the price of the bond if market interest rates are 6 percent?
a. $95,082.68.
b. $95,769.55.
c. $95,023.00.
d. $100,000.00.
e. $96,557.87.
3. What is the percentage price change for the bond if interest rates decline 50 basis points from the original 5 percent?
a. –2.106 percent.
b. +2.579 percent.
c. +0.000 percent.
d. +3.739 percent.
e. +2.444 percent.
Summary
These short questions belong to Finance and they deal with the calculation of price of a bond with 1 year maturity depending upon the market interest rates.
Total Word Count 78
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