Question

A bond is paying $20 coupon every six month. The bond's face value is $1000 and...

A bond is paying $20 coupon every six month. The bond's face value is $1000 and it has 5 years to maturity. By what percentage will the price of the bond change, if the current YTM of 10% decreases to 8.5% due to a credit rating upgrade? (Provide your answer in percent rounded to two decimals, omitting the % sign.)

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Answer #1

% change in bond price is given as equal to=PV(8.5%/2,5*2,20,-1000)/PV(10%/2,5*2,20,-1000)-1
=8.67%

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