# Solution Library

# Calculate Change In Bond Price With Change In Market Interest Rates

**Question**

Consider a six-year maturity, $100,000 face value bond that pays a 5 percent fixed coupon annually.

1. What is the price of the bond if market interest rates are 4 percent?

a. $105,816.44.

b. $105,287.67.

c. $105,242.14.

d. $100,000.00.

e. $106,290.56.

2. What is the price of the bond if market interest rates are 6 percent?

a. $95,082.68.

b. $95,769.55.

c. $95,023.00.

d. $100,000.00.

e. $96,557.87.

3. What is the percentage price change for the bond if interest rates decline 50 basis points from the original 5 percent?

a. –2.106 percent.

b. +2.579 percent.

c. +0.000 percent.

d. +3.739 percent.

e. +2.444 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 78**

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