Calculate The Change In The Price Of Bond With Change In Market Interest Rates

Question

Consider a one-year maturity, \$100,000 face value bond that pays a 6 percent fixed coupon annually.

1. What is the price of the bond if market interest rates are 7 percent?
a. \$99,050.15.
b. \$99,457.94.
c. \$99,249.62.
d. \$100,000.00.
e. \$99,065.42.

2. What is the price of the bond if market interest rates are 5 percent?
a. \$100,952.38.
b. \$101,238.10.
c. \$100,963.71.
d. \$100,000.00.
e. \$101,108.27.

3. What is the percentage price change for the bond if interest rates increase 50 basis points from the original 6 percent?
a. –0.1033 percent.
b. –0.4766 percent.
c. –0.4695 percent.
d. 0.0000 percent.
e. –0.2907 percent.

Summary

These short questions belong to Finance and they deal with the calculation of price of a bond with 1 year maturity depending upon the market interest rates.

Total Word Count 76

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