Urgent!!! Please answer within one hour. A $5,000 bond with a coupon rate of 5.1% paid...

Question

Question

A $5,000 bond with a coupon rate of 5.1% paid semiannually has nine years to maturity and a yield to maturity of 7.3%. If int

Urgent!!! Please answer within one hour.

Answer 1

Answer #1

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Put in calculator

FV		5000
PMT	5000*5.1%/2	127.50
I	7.3%/2	3.650%
N	=9*2	18

compute PV		($4,283.51)

therefore value of bond =		$4,283.51

If market rate increased to 7.6% revised bond value =
Put in calculator

FV		5000
PMT	5000*5.1%/2	127.50
I	7.6%/2	3.800%
N	=9*2	18

compute PV		($4,195.78)

therefore value of bond =		$4,195.78

therefore change in value =		$87.73


therefore correct answer is option		C. Fall by 87.73

Answer 2

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