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You find a bond with 21 years until maturity that has a coupon rate of 6.0...

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Finance

You find a bond with 21 years until maturity that has a couponrate of 6.0 percent and a yield to maturity of 5.2 percent. Supposethe yield to maturity on the bond increases by 0.25 percent.

a. What is the new price of the bond usingduration and using the bond pricing formula? (Do not roundintermediate calculations. Round your answers to 2 decimalplaces.)

Estimated price:

Actual Price:

b. Now suppose the original yield to maturityis increased by 1 percent. What is the new price of the bond?(Do not round intermediate calculations. Round your answersto 2 decimal places.)

   

Estimated Price:

Actual Price:

Answer & Explanation Solved by verified expert
3.5 Ratings (433 Votes)
1 Period Year cash flow present value of cash flow cash flow1rn r 52 present valueperiod 1 60 5703422053 5703422053 2 60 5421503853 1084300771 3 60 5153520773 1546056232 4 60 4898784004 1959513602 5 60 4656638788 2328319394 6 60 4426462726 2655877635 7 60 4207664188 2945364932 8 60    See Answer
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Transcribed Image Text

You find a bond with 21 years until maturity that has a couponrate of 6.0 percent and a yield to maturity of 5.2 percent. Supposethe yield to maturity on the bond increases by 0.25 percent.a. What is the new price of the bond usingduration and using the bond pricing formula? (Do not roundintermediate calculations. Round your answers to 2 decimalplaces.)Estimated price:Actual Price:b. Now suppose the original yield to maturityis increased by 1 percent. What is the new price of the bond?(Do not round intermediate calculations. Round your answersto 2 decimal places.)   Estimated Price:Actual Price:

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