A $5,000 bond with a coupon rate of 5.7% paid semiannually has nine years to maturity and a yield to maturity of 8.4%. If interest rates rise and the yield to maturity increases to 8.7%, what will happen to the price of the bond? OA rise by $82.22 OB. fall by $98.67 OC. fall by $82.22 OD. The price of the bond will not change.

A $5,000 bond with a coupon rate of 5.7% paid semiannually has nine years to maturity and a yield to maturity of 8.4%. If interest rates rise and the yield to maturity increases to 8.7%, what will happen to the price of the bond? OA rise by $82.22 OB. fall by $98.67 OC. fall by $82.22 OD. The price of the bond will not change.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 8MC: Suppose a 10-year, 10% semiannual coupon bond with a par value of 1,000 is currently selling for...

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Concept explainers

Bond Valuation

Bond valuation are the notes issued by the corporation to raise long-term funds for the business. The corporations are required to pay the interest on such liabilities at a specified rate of interest (termed as coupon rate) at specified dates which may be on semi-annual or annual basis. These interest payments may be in the form of coupons.

Question

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A $5,000 bond with a coupon rate of 5.7% paid semiannually has nine years to maturity and a yield to maturity of 8.4%. If interest
rates rise and the yield to maturity increases to 8.7%, what will happen to the price of the bond?
OA. rise by $82.22
B. fall by $98.67
OC. fall by $82.22
D. The price of the bond will not change.

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