Instructions:
You are required to use a financial calculator or spreadsheet(Excel) to solve related to the risk and return, stocks and bondsvaluation. You are required to show the following 3 steps for eachproblem (sample questions and solutions are provided forguidance):
(i) Describe and interpret the assumptions related to theproblem.
(ii) Apply the appropriate mathematical model to solve theproblem.
(iii) Calculate the correct solution to the problem.
PROBLEM:
Consider a 10 year bond with face value $1,000 that pays a 6.8%coupon semi-annually and has a yield-to-maturity of 8.4%. What isthe approximate percentage change in the price of bond if interestrates in the economy are expected to decrease by 0.60% per year?Submit your answer as a percentage and round to two decimal places.(Hint: What is the expected price of the bond before and after thechange in interest rates?)
