1 answer

A $1,000 bond with a coupon rate of 5.1% paid semiannually has ton years to maturity...

Question:


A $1,000 bond with a coupon rate of 5.1% paid semiannually has ton years to maturity and a yield to maturity of 6.9%. If inte
A $1,000 bond with a coupon rate of 5.1% paid semiannually has ton years to maturity and a yield to maturity of 6.9%. If interest rates fall and the yield to maturity decreases by 0.8%, what will happen to the price of the bond? O A. rise by $54.45 O B. fall by $54.45 O c. rise by $76.23 OD. fall by $65.34

Answers

rate positively ..

We have to compute the price of the bond using financial calculator for each case
Put in the calculator for each individual case
Orignial With change in interet rate
FV 1000 1000
PMT 1000*5.1%/2 25.5 25.5
I 6.9%/2 0.0345 6.1%/2 0.0305
N 10*2 20 20
Compute PV ($871.51) ($925.96)
Price = $871.51 $925.96
Change in price = $54.45
Therefore correct answer is option A. Rise by $54.45
.

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