UGBA 103 2 2016 There are three bonds, each with a coupon of 6 00 , and maturity of 7, 16 and 25 years The market interest rate is 6 23 for all maturities The par is $1,000 (a) Find the price of each bond (b) Suppose the market interest rate now increases to 6 95 For each bond, find the new price and percentage change in the price (which measures the price sensitivity) What is the relationship among the bonds in terms of bond price sensitivity, i e interest rate risk (c) Suppose the market interest rate now decreases to 5 95 For each bond, find the new price, and percentage change in the price as compared to the initial prices found in (a) Start with a situation in which there are three 10 year bonds with 0 , 4 00 and 9 00 coupons The initial market interest rate is 8 22 The par is $1,000 (a) Find the price of each bond (b) Suppose the market interest rate now increases to 8 45 For each bond, find the new price and percentage change in the price What is the relationship among the bonds in terms of bond price sensitivity, i e interest rate risk (c) Suppose the market interest rate now decreases to 8 05 For each bond, find the new price, and percentage change in the price as compared to the initial prices found in (a) Start with a situation in which there are two 10 year bonds bond A with a 7 62 and bond B with a 9 41 coupon The bonds are of different credit quality, so they trade in separate markets Suppose the initial market interest rate is 8 03 for bond A and 9 12 for bond B The par is $1,000 (a) Find the price of each bond (b) Suppose the market interest rate for each bond increases by 50 For each bond, find the new price and percentage change in the price What is the relationship among the bonds in terms of bond price sensitivity, i e interest rate risk (c) Suppose the market interest rate for each bond decreases by 35 For each bond, find the new price, and percentage change in the price as compared to the initial prices found in (a)

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Question: UGBA 103 #2--2016 There are three bonds, each with a coupon of 6.00%, and maturity of 7, 16 and 25 years. The market interest rate

UGBA 103 #2--2016

There are three bonds, each with a coupon of 6.00%, and maturity of 7, 16 and 25 years. The market interest rate is 6.23% for all maturities. The par is $1,000.

(a) Find the price of each bond.
(b) Suppose the market interest rate now increases to 6.95%. For each bond, find the new price and percentage change in the price (which measures the price sensitivity). What is the relationship among the bonds in terms of bond price sensitivity, i.e. interest rate risk?
(c) Suppose the market interest rate now decreases to 5.95%. For each bond, find the new price, and percentage change in the price as compared to the initial prices found in (a).

Start with a situation in which there are three 10-year bonds with 0%, 4.00% and 9.00% coupons. The initial market interest rate is 8.22%. The par is $1,000.

(a) Find the price of each bond.
(b) Suppose the market interest rate now increases to 8.45%. For each bond, find the new price and percentage change in the price. What is the relationship among the bonds in terms of bond price sensitivity, i.e. interest rate risk?
(c) Suppose the market interest rate now decreases to 8.05%. For each bond, find the new price, and percentage change in the price as compared to the initial prices found in (a).

Start with a situation in which there are two 10-year bonds: bond A with a 7.62% and bond B with a 9.41% coupon. The bonds are of different credit quality, so they trade in separate markets. Suppose the initial market interest rate is 8.03% for bond A and 9.12% for bond B. The par is $1,000.

(a) Find the price of each bond.
(b) Suppose the market interest rate for each bond increases by .50%. For each bond, find the new price and percentage change in the price. What is the relationship among the bonds in terms of bond price sensitivity, i.e. interest rate risk?
(c) Suppose the market interest rate for each bond decreases by .35%. For each bond, find the new price, and percentage change in the price as compared to the initial prices found in (a).

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