Coupon bond pays interest annually

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A 6% coupon bond pays interest annually, matures in 7 years, and has a principal of $1000.

(a) Assuming a discount rate of 8%, what is the price of this bond?

(b) Assuming a discount rate of 8.5%, what is the price of this bond?

(c) Assuming a discount rate of 7.5%, what is the price of this bond?

(d) What is the duration of this bond, assuming that the price is the one you calculated in part (a)?

(e) If the yield changes by 100 basis points, from 8% to 7%, what would be the approximate % price change using the calculated duration from part (d)?

(f) What is the actual % price change given the yield change in (e)?

Reference no: EM131021506

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