Question: Problem 12: Consider a coupon bond with a face and redemption value of $100 and a term of 5 years and a yield to

Problem 12: Consider a coupon bond with a face and redemption value

Problem 12: Consider a coupon bond with a face and redemption value of $100 and a term of 5 years and a yield to maturity of 10% per annum compounded semiannually. a. Bertha's bond has coupon rate of 10% per annum payable semiannually. Her yield decreases from 10% to 9% per annum compounded semiannually. Find the new price. What is the percent change? Percent Change New price b. Bill' bond has a coupon rate of 5% per annum payable semiannually. His yield decreases from 10% to 9% per annum compound semiannually. Find the old price. Find the new price. What is the percent change? New price Percent Change c. Whose bond changed more, i.e. whose bond is more sensitive.

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Answer a i New price 10938 ii Percent change 938 b i New price 9861 ii Percent change 139 c Berthas ... View full answer

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