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Consider an eight-year, 11.5 percent annual coupon bond with a face value of $1,000. The bond...

Consider an eight-year, 11.5 percent annual coupon bond with a face value of $1,000. The bond is trading at a rate of 8.5 percent.


a.

What is the price of the bond? (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))


  Price of the bond $   


b.

If the rate of interest increases 1 percent, what will be the bond’s new price? (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))


  Bond’s new price $   


c.

Using your answers to parts (a) and (b), what is the percentage change in the bond’s price as a result of the 1 percent increase in interest rates? (Negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))


  Percentage change %


d.

Repeat parts (b) and (c) assuming a 1 percent decrease in interest rates. (Do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16))


  
  Bond’s new price $   
  Percentage change %
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Answer #1

Time to maturity Face value Coupon Yield 1,000 115 8.5% 4 Years> Cash flows D.socunting factor @ 8.5% Discounted cash flows 115 0.9217 106 115 0.8495 115 0.7829 90 115 0.7216 115 0.6650 115 0.6129 70 115 0.5649 115 0.5207 1,000 0.5207 521 ice of bond today 1,169.18<<a 13 Years > 115 0.5801 115 Cash flows Disocunting factor @ 9.5% Discounted cash flows 115 0.9132 105 115 0.8340 96 115 0.7617 115 0.6956 80 115 115 0.4838 1,000 0.4838 0.6352 0.5298 ice of bond today 1,108.67<< b change in price 5.18% <<C Years > Cash flows D.soc unting factor @ 7.5% Discounted cash flows 115 0.6966 80 115 0.6480 75 115 0.6028 69 115 0.9302 107 115 0.8653 100 115 0.8050 93 115 0.7488 86 115 0.5607 1,000 0.5607 561 27 Price of bond today 1,234.29<< d.1 change in price 5.57% << d.2lime to matur B yrs 1000 -C2 11.5% 0.085 Years > Cash flows Discn:unting factur @ 8.5% Discounted cash flows D6+1 E6+1 H6+1 -16+1 SC$3 C7 C8 -SUM(C9: SCS3 SC$3 SC$3 SCS3 SC$3 SC$3 SCS3 -C2 D7 D8 E7 E8 J7 J8 e of bond to 44a -C13+1 E13+1 SC$3 -1 =F14F15 -F13+1 G13+1 SCS3 -1/(19.5%)AH13 H14 H15 H13+1 113+1 D13+1 SCS3 -1/(119.5%)AE13 E14 E15 113 Cash flows Disocunting facto 5% Discounted cash flows SC$3 -1/(1 19.5%) C14 C15 SCS3 -1(1 D14 D15 SCS3 (1 -G14 G15 SC$3 SCS3 C13 9.5%)AD13 19.5% і 3 -1 9.5%)&G13 -1/(1+95% 113-1 (1 9.5%)시13 -1 (119,5%) K14 K15 K13 114 115 -J14 J15 of barnd today -SUM(C16:K16) b 20 C22+1 -SCS3 |-1/(1+1.5%)AD22 -D23 D24 D22 1 SC$3 E22+1 $C$3 F22+1 -SCS3 G22-1 $C$3 122+1 -SCS3 Years> Cash flows Disocunting factor @ 1.5% Discounted cash flows H22+1 SC$3 J22 1/(1+1.5%)nC22 C23 C24 |-1/(1+/.5%) |-1/(1+/-5%》사22-1/(1+1.5%)AG22 |-1/(1+1.5%)사122 |-1/(1+/-5%}시22-1/(1+1.5%)시22 |-1/(1+1.5%)AK22 K23 K24 22 E23 E24 -G23 G24 J23*J24 25 26 F23 F24 H23 H24 123 124 29 o d.2

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