A 10-year bond has face value (redemption value) $250,000 and quarterly coupons of 2%. Consider the time rightafter the 12th coupon has been paid, when the yield is 3.4%.(a) What is the price of the bond?(b) Compute the price of the bond if the yield were to increase by 1 basis point (a basis point is 1/100 of 1%).What is the absolute value of the difference between that price, and your answer to part a)?(c) Would the yield have to increase or decrease in order for the bond to increase in value by $885.53?(d) Based only on your answer to b), approximately how many basis points (bp) would the yield have to move inorder for the bond to increase in value by $885.53?(Answer as a positive integer.)b):#5(c):(A) Decrease (B) Increase5(d):Answer correct to 2 decimals.SelectAnswer correct to 2 decimals.Answer as a positive integer

(a) To calculate the price of the bond after the 12th coupon has been paid, we need to find the…

(a) What is the price of the bond? (b) Compute the price of the bond if the yield were to increase by 1 basis point (a basis point is 1/100 of 1%). What is the absolute value of the difference between that price, and your answer to part a)? (e) Would the yield have to increase or decrease in order for the bond to increase in value by $885.53? (d) Based only on your answer to b), approximately how many basis points (bp) would the yield have to move in order for the bond to increase in value by $885.53? (Answer as a positive integer.)

(a) What is the price of the bond? (b) Compute the price of the bond if the yield were to increase by 1 basis point (a basis point is 1/100 of 1%). What is the absolute value of the difference between that price, and your answer to part a)? (e) Would the yield have to increase or decrease in order for the bond to increase in value by $885.53? (d) Based only on your answer to b), approximately how many basis points (bp) would the yield have to move in order for the bond to increase in value by $885.53? (Answer as a positive integer.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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