Question

Iv.) 8a.) TTM: 2 years YTM: 8% C: 7% 8b.) TTM: 25 years YTM: 8% C:7% Question for Problem 8. How much does the price change if the yield to maturity, for each bond, increases one basis point? V.) Try This. 9a.) TTM: 2 years YTM: 8% C: 7% 9b.) TTM: 25 years YTM: 8% C: 7% Question for Problem 9, How much does the yield to maturity change, for each bond, if the price increases by 1/32 ofa percentage point? VI.) 10a.) TTM: 3 years YTM: 7% C: 6% PV: ? 10b.) TTM: 30 years YTM: 7% C: 6% PV: ?

Answer 1

As per rules I am answering the first 4 subparts of the question.

For Q 8 we use excel PV function for calculation of the old price and new price. Change in price = New price- Old price

	Original price	New Price	Change
8a	$982.17	$981.9915	($0.1759)
	Original price	New Price	Change
8b	$893.25	$892.2768	($0.9754)

For Q9, we first take the original price. New price = Old price *(100%+ (1/32)%)

Using new price, the YTM is computed and then we find the change in YTM.

9a	Original price	$982.1674
	New Price	$982.4743
	New YTM	7.9826%
	Change in YTM	0.0174%
9b	Original price	$893.2522
	New Price	$893.5314
	New YTM	7.9971%
	Change in YTM	0.0029%

WORKINGS