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A 16-year, 4.5 percent coupon bond pays interest annually. The bond has a face value of...

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Finance

A 16-year, 4.5 percent coupon bond pays interest annually. Thebond has a face value of $1,000. What is the percentage change inthe price of this bond if the market yield to maturity rises to 5.7percent from the current rate of 5.5 percent?

a.

0.21% increase

b.

2.14% decrease

c.

$19.19 increase

d.

1.97% increase

Answer & Explanation Solved by verified expert
3.9 Ratings (548 Votes)
Find the price of the bond when the yield to maturity is 55 and then find the price of the bond when the yield to maturity is 57 ParFace value 1000 Annual Coupon rate 0045 Annual coupon 45 Present Value Future value 1rt where r is    See Answer
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Transcribed Image Text

A 16-year, 4.5 percent coupon bond pays interest annually. Thebond has a face value of $1,000. What is the percentage change inthe price of this bond if the market yield to maturity rises to 5.7percent from the current rate of 5.5 percent?a.0.21% increaseb.2.14% decreasec.$19.19 increased.1.97% increase

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