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Solution Library
Calculation of Change in Price of Bond With Changes in Market Interest Rates
Question
Consider a one-year maturity, $100,000 face value bond that pays a 6 percent fixed coupon annually.
1. What is the price of the bond if market interest rates are 7 percent?
a. $99,050.15.
b. $99,457.94.
c. $99,249.62.
d. $100,000.00.
e. $99,065.42.
2. What is the price of the bond if market interest rates are 5 percent?
a. $100,952.38.
b. $101,238.10.
c. $100,963.71.
d. $100,000.00.
e. $101,108.27.
3. What is the percentage price change for the bond if interest rates increase 50 basis points from the original 6 percent?
a. –0.1033 percent.
b. –0.4766 percent.
c. –0.4695 percent.
d. 0.0000 percent.
e. –0.2907 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 76
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