You find a bond with 27 years until maturity that has a coupon rate of 9.0 percent and a yield to maturity of 8.1 percent. Suppose the yield to maturity on the bond increases by .25 percent. a. What is the new price of the bond using duration and using the bond pricing formula? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Answer is complete but not entirely correct.

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
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You find a bond with 27 years until maturity that has a coupon rate of 9.0 percent and a yield to
maturity of 8.1 percent. Suppose the yield to maturity on the bond increases by .25 percent.
a. What is the new price of the bond using duration and using the bond pricing formula? (Do not
round intermediate calculations. Round your answers to 2 decimal places.)
Answer is complete but not entirely correct.
Estimated price
$
1,068.91
Actual price
2$
1,097.54 X
b. Now suppose the original yield to maturity is increased by 1 percent. What is the new price of
the bond? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
X Answer is complete but not entirely correct.
Estimated price
$
965.92 X
Actual price
$
990.06
Transcribed Image Text:You find a bond with 27 years until maturity that has a coupon rate of 9.0 percent and a yield to maturity of 8.1 percent. Suppose the yield to maturity on the bond increases by .25 percent. a. What is the new price of the bond using duration and using the bond pricing formula? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Answer is complete but not entirely correct. Estimated price $ 1,068.91 Actual price 2$ 1,097.54 X b. Now suppose the original yield to maturity is increased by 1 percent. What is the new price of the bond? (Do not round intermediate calculations. Round your answers to 2 decimal places.) X Answer is complete but not entirely correct. Estimated price $ 965.92 X Actual price $ 990.06
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