10 i. Calculate the value of duration for a four year, $1000 par value bond purchased today at a yield to maturity of 15 percent. The bond's coupon rate is 12%, and it pays interest at year's end. ii. Now suppose the market interest rate on comparable bonds falls to 14 percent. What percentage change in this bond's price will result? iii. Given the information in i. did the bond sell at a discount or premium?
10 i. Calculate the value of duration for a four year, $1000 par value bond purchased today at a yield to maturity of 15 percent. The bond's coupon rate is 12%, and it pays interest at year's end. ii. Now suppose the market interest rate on comparable bonds falls to 14 percent. What percentage change in this bond's price will result? iii. Given the information in i. did the bond sell at a discount or premium?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:10 i. Calculate the value of duration for a four year, $1000
par value bond purchased today at a yield to maturity of 15
percent.
The bond's coupon rate is 12%, and it pays interest at year's
end.
ii. Now suppose the market interest rate on comparable
bonds falls to 14 percent. What percentage change in this
bond's price will result?
iii. Given the information in i. did the bond sell at a discount
or premium?
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