A bond has a Macaulay duration of 7.50 and is priced to yield 5.5%. If interest rates go up so that the yield goes to 6.0%, what will E percentage change in the price of the bond? Now, if the yield on this bond goes down to 5%, what will be the bond's percentage cha in price? Comment on your findings. If interest rates go up to 6.0%, the percentage change in the price of the bond is%. (Round to two decimal places.) If interest rates go down to 5%, the percentage change in the price of the bond is%. (Round to two decimal places.) Comment on your findings. (Select the best answer below.) OA. As interest rates increase or decrease, the price of the bond will always increase. B. As interest rates increase, the price of the bond decreases. As interest rates decrease, the price of the bond increases.
A bond has a Macaulay duration of 7.50 and is priced to yield 5.5%. If interest rates go up so that the yield goes to 6.0%, what will E percentage change in the price of the bond? Now, if the yield on this bond goes down to 5%, what will be the bond's percentage cha in price? Comment on your findings. If interest rates go up to 6.0%, the percentage change in the price of the bond is%. (Round to two decimal places.) If interest rates go down to 5%, the percentage change in the price of the bond is%. (Round to two decimal places.) Comment on your findings. (Select the best answer below.) OA. As interest rates increase or decrease, the price of the bond will always increase. B. As interest rates increase, the price of the bond decreases. As interest rates decrease, the price of the bond increases.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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![A bond has a Macaulay duration of 7.50 and is priced to yield 5.5%. If interest rates go up so that the yield goes to 6.0%, what will be the
percentage change in the price of the bond? Now, if the yield on this bond goes down to 5%, what will be the bond's percentage change
in price? Comment on your findings.
If interest rates go up to 6.0%, the percentage change in the price of the bond is%. (Round to two decimal places.)
If interest rates go down to 5%, the percentage change in the price of the bond is%. (Round to two decimal places.)
Comment on your findings. (Select the best answer below.)
OA. As interest rates increase or decrease, the price of the bond will always increase.
B. As interest rates increase, the price of the bond decreases. As interest rates decrease, the price of the bond increases.
OC. As interest rates increase or decrease, the price of the bond remains the same.
OD. As interest rates decrease, the price of the bond decreases. As interest rates increase, the price of the bond increases.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4eb7a100-22a2-44b4-a414-d055054c0838%2F85740695-7f49-4a40-935e-8028ed475f97%2F53z13cr_processed.jpeg&w=3840&q=75)
Transcribed Image Text:A bond has a Macaulay duration of 7.50 and is priced to yield 5.5%. If interest rates go up so that the yield goes to 6.0%, what will be the
percentage change in the price of the bond? Now, if the yield on this bond goes down to 5%, what will be the bond's percentage change
in price? Comment on your findings.
If interest rates go up to 6.0%, the percentage change in the price of the bond is%. (Round to two decimal places.)
If interest rates go down to 5%, the percentage change in the price of the bond is%. (Round to two decimal places.)
Comment on your findings. (Select the best answer below.)
OA. As interest rates increase or decrease, the price of the bond will always increase.
B. As interest rates increase, the price of the bond decreases. As interest rates decrease, the price of the bond increases.
OC. As interest rates increase or decrease, the price of the bond remains the same.
OD. As interest rates decrease, the price of the bond decreases. As interest rates increase, the price of the bond increases.
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