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02-07-2021
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What happens to the price of a three-year annual coupon paying bond with an 8% coupon when interest rates change from 8% to 8.96%

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ogorwyne ogorwyne

02-07-2021

Answer:

It would reduce to -24.3185

Explanation:

I solved this on paper and have added the solution as an attachment

At 8% rate of interest the price of this bond is 1000

At 8.96% rate of interest the calculated price of the coupon bond is 975.681

975.681-1000 = -24.3185

When the interest rate falls from 8% to 8.96%, the price of the bond reduces by -24.3185

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