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