As a bond fund manager, you are considering corporate bonds issued by Super Buy (SB). Each SB bond is a 4-year bondwith a par value of $1 million. Its interest payments are based on the following schedule: $50,000 in year 1, $60,000 in years2, $70,000 in year 3, and $80,000 in year 4. You estimate SB's current interest rate is 6%. What is the estimated new bondprice using the duration model if the YTM increases by 100 basis points?OA. $1.0149 millionOB. $1.0496 millionOC.$0.9802 millionOD. $0.9795 million

Price of the bond is the present value of cash flow from the bond and present value of par value of…

As a bond fund manager, you are considering corporate bonds issued by Super Buy (SB). Each SB bond is a 4-year bona with a par value of $1 million. Its interest payments are based on the following schedule: $50,000 in year 1, $60,000 in year 2, $70,000 in year 3, and $80,000 in year 4. You estimate SB's current interest rate is 6%. What is the estimated new bond price using the duration model if the YTM increases by 100 basis points? OA. $1.0149 million OB. $1.0496 million OC. $0.9802 million D. $0.9795 million

As a bond fund manager, you are considering corporate bonds issued by Super Buy (SB). Each SB bond is a 4-year bona with a par value of $1 million. Its interest payments are based on the following schedule: $50,000 in year 1, $60,000 in year 2, $70,000 in year 3, and $80,000 in year 4. You estimate SB's current interest rate is 6%. What is the estimated new bond price using the duration model if the YTM increases by 100 basis points? OA. $1.0149 million OB. $1.0496 million OC. $0.9802 million D. $0.9795 million

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

Chapter11: Bond Pricing And Amortization (bonds)

Section: Chapter Questions

Problem 7R

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As a bond fund manager, you are considering corporate bonds issued by Super Buy (SB). Each SB bond is a 4-year bond with a par value of $1 million. Its interest payments are based on the following schedule: $50,000 in year 1, $60,000 in year 2, $70,000 in year 3, and $80,000 in year 4. You estimate SB's current interest rate is 6%. What is the actual bond price change if the YTM increases by 100 basis points? OA.-3.49% OB.3.42% O C.3.49% O D.-3.42%
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