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