The price of a 10-year bond can decline by approximately 9% if interest rates rise by 1%
Question:
The price of a 10-year bond can decline by approximately 9% if interest rates rise by 1% point. To illustrate this, suppose you own a 10-year U.S. Treasury bond that has a bond rate of 2% per year. How much money will you lose if the value of the bond today is $10,000 (face value of the bond) and the yield increases to 3% within the next few months?
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Step by Step Answer:
Use Equation 52 to compute the value of the bond when the i...View the full answer
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Related Book For 
Engineering Economy
ISBN: 978-0133439274
16th edition
Authors: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
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