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The Corner Grocer has a 7-year, 6 percent annual couponbondoutstanding with a $1,000 par value. The bond has a yieldtomaturity of 5.5 percent. Which one of the following statementsiscorrect if the market yield suddenly increases to 6.5 percent?
The bond price will increase by $57.14.
The bond price will increase by5.29percent.
The bond price will decrease by $53.62.
The bond price will decrease by5.43percent.
The bond price will decrease by5.36percent.

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Jarrod Robel
Jarrod RobelLv2
28 Sep 2019

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Related questions

5. Jackson Central has a 6-year, 8% annual coupon bond with a $1,000 par value. Earls Enterprises has a 12-year, 8% annual coupon bond with a $1,000 par value. Both bonds currently have a yield to maturity of 6%. Which of the following statements are correct if the market yield increases to 7%?
A. Both bonds would decrease in value by 4.61%.
B. The Earls bond will increase in value by $88.25.
C. The Jackson bond will increase in value by 4.61%.
D. The Earls bond will decrease in value by 7.56%.
E. The Earls bond will decrease in value by $50.68.

Question:

ABC Company is planning to issue a 10 percent,semiannualcoupon bond with five years remaining to maturity. Thebond hasbeen priced (Par value) as Rs. 1,000. The bond has yieldtomaturity of 10 percent. The company is interested in estimatingtheeffects of yield changes on the price of the bond.

Requirement:

Calculate the Modified Duration of the bond.

1) Fooling Company has a 11.4 percent callable bond outstanding on the market with 25 years to maturity, call protection for the next 10 years, and a call premium of $25. What is the yield to call (YTC) for this bond if the current price is 103 percent of par value?

2) Consider a 5.4 percent coupon bond with nine years to maturity and a current price of $1,055.40. Suppose the yield on the bond suddenly increases by 2 percent. Find the duration to estimate the new price of the bond. And Calculate the new bond price.

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