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A 4-year 5.8% coupon bond is selling to yield 7%. The bond pays interest annually. One year later interest rates decrease from 7% to 6.2%.
A. What is the price of the 4-year 5.8% coupon bond selling to yield 7%?
B. What is the price of this bond one year later assuming the yield is unchanged at 7%?
C. What is the price of this bond one year later if instead of the yield being unchanged the yield decreases to 6.2%?
D. Complete the following:
Price change attributable to moving to maturity (no change in discount rate)
Price change attribute to an increase in the discount rate from 7% to 6.2%
Total price change
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