# Question

Consider a bond selling at par ($100) with a coupon rate of 6% and 10 years to maturity.

(a) What is the price of this bond if the required yield is 15%?

(b) What is the price of this bond if the required yield increases from 15% to 16%, and by what percentage did the price of this bond change?

(c) What is the price of this bond if the required yield is 5%?

(d) What is the price of this bond if the required yield increases from 5% to 6%, and by what percentage did the price of this bond change?

(e) From your answers to Question 9, parts b and d, what can you say about the relative price volatility of a bond in a high-interest-rate environment compared to a low-interest-rate environment?

(a) What is the price of this bond if the required yield is 15%?

(b) What is the price of this bond if the required yield increases from 15% to 16%, and by what percentage did the price of this bond change?

(c) What is the price of this bond if the required yield is 5%?

(d) What is the price of this bond if the required yield increases from 5% to 6%, and by what percentage did the price of this bond change?

(e) From your answers to Question 9, parts b and d, what can you say about the relative price volatility of a bond in a high-interest-rate environment compared to a low-interest-rate environment?

## Answer to relevant Questions

A debt obligation offers the following payments: Years from Now Cash Flow to Investor 1........... $2,000 2........... $2,000 3........... $2,500 4........... $4,000 Suppose that the price of this debt obligation is ...Explain why the total return from holding a bond to maturity will be between the yield to maturity and the reinvestment rate. What is the yield to maturity calculated on a bond-equivalent basis? What are the limitations of using duration as a measure of a bond’s price sensitivity to interest-rate changes? Calculate the requested measures in parts (a) through (f) for bonds A and B (assume that each bond pays interest semiannually): (a) What is the price value of a basis point for bonds A and B? (b) Compute the Macaulay ...Post your question

0