Question

A 6.5% coupon bond with 14 years left to maturity is priced to offer a 7.2% yield to maturity. you believe that in one year, the yield to maturity will be 6.8%. What is the change in price the bond will experience in dollars?

Answer 1

C13 - : X fx =G11-C11 1 1,000 6.5% Α 1 Bond price 2 Coupon rate 3 Number of compounding periods per year 4 = 1*2/3 Interest per period (PMT) 5 Number of years to maturity | 6 =3*5 Number of compounding periods till maturity (NPER) 7 Market rate of return/Required rate of return 8 = 7/3 Market rate of return/Required rate of return per period (RATE) Bond price now [ E 1,000 1 Bond price 6.5% 2 Coupon rate 3 Number of compounding periods per year 65 || 4 = 1*2/3 Interest per period (PMT) 14 5 Number of years to maturity 146 = 3*5 Number of compounding periods till maturity (NPER) 7.2% 7 Market rate of return/Required rate of return 7.2% 8 = 7/3| Market rate of return/Required rate of return per period (RATE) PV(RATE,NPER,PMT,FV)*-1 Bond price after 1 year 65 13 131 6.8% 6.8% PV(RATE,NPER,PMT,FV)*-1 8 Bond price now 939.51 Bond price after 1 year 974.64 13 Change in bond price in $ $ 35.13

*Please rate thumbs up