Question

Both Bond A and Bond B have 7.8 percent coupons and are priced at par value. Bond A has 9 years to maturity, while Bond B has 16 years to maturity a. If interest rates suddenly rise by 2.2 percent, what is the percentage change in price of Bond A and Bond B? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Bond Answer is complete and correct. % in Price (12.87) % (17.21) % Bond b. If interest rates suddenly fall by 2.2 percent instead, what would be the percentage change in price of Bond A and Bond B? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Answer is not complete. % A in Price Bond (Bond 22.86

Answer 1

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- 2x А P 157 18 32 BOND - Microsoft Excel (Product Activation Failed) File Home Insert Page Layout Formulas Data Review View Add-Ins % Cut Σ AutoSum : A Calibri -11AA = = = Dr Wrap Text General Ea Copy Fill 2 m Paste B Format Painter I U B- A Merge & Center - $ -% Sort & . Find & Formatting as Table Styles 2 Clear Filter Select Clipboard Font Alignment Number Styles Cells Editing 0154 B E F Η J K M N O 154 BOND A BONDB 155 COUPON 7.80% SEMI ANNUAL COUPON 7.80% SEMI ANNUAL 156 YEARS YEARS 16 FV 1000 FV 1000 158 COUPON(S) 39 SEMI ANNUAL COUPON(S) 39 SEMI ANNUAL 159 NO OF PERIODS NO OF PERIODS 160 161 162 YTM= 7.80% YTM = 7.80% 163 YTM = 3.90% SEMI ANNUAL YTM = 3.90% SEMI ANNUAL 164 165 PRICE = 1000.00 [=PV(D163,D159,-D158,-D157)] PRICE = 1000.00 [=PV(L163,L159,-L158,-L157)] 166 167 INTEREST RATE SUDDENLY RISES BY 2.2% INTEREST RATE SUDDENLY RISES BY 2.2% 168 YTM 10.00% YTM 10.00% 169 YTM 5.00% SEMI ANNUAL YTM 5.00% SEMI ANNUAL 170 171 PRICE 871.41 (=PV(D169,D159,-D158,-D157)] PRICE 826.17 (=PV(L169,L159,-L158,-L157)] 172 173 % CHANGE IN PRICE = (D171-D165)/D165 = -12.86% % CHANGE IN PRICE = (L171-L165)/L165 = -17.38% 174 H YIELD SPOT Sheet2 AFN BANKING NOTE 51 53 CLEAN PRICE 510 BIDDING, UNDERWRITING EUAC AW LIFELP, IP, MRP, INFLATION WARRANT refund S4 S5 S6 I LI Rea 1 ferences BOU 120% _ O DO 90 * 40 ENG 08-11-2019

BOND - Microsoft Excel (Product Activation Failed) Add-Ins File Home Insert Page Layout Formulas Data Review View - 2x % Cut Σ AutoSum : A Calibri Dr General -11AA = = = B- A Wrap Text Merge & Center - B I U $ -% . Fill 2 Clear E Copy Paste Format Painter Clipboard 1184 Formatting as Table Styles Styles Sort & Filter Editing Find & Select Font Alignment Number Cells B C D E H. J K L M N O P 174 b INTEREST RATE SUDDENLY FALLS BY 2.2% YTM 5.600% YTM 2.80% SEMI ANNUAL PRICE 1153.88 (=PV(D178,D159,-D158,-D157)] INTEREST RATE SUDDENLY FALLS BY 2.2% YTM 5.60% YTM 2.80% SEMI ANNUAL PRICE 1230.51 [=PV(L178,L159,-L158,-L157)] % CHANGE IN PRICE = (D179-D165)/D165 = 15.39% % CHANGE IN PRICE = (L179-L165)/L165 = 23.05% 175 176 177 178 179 180 181 182 183 184 185 186 187 188 189 190 191 192 193 194 HEM Rea Sheet2 AFN BANKING NOTE 51 53 CLEAN PRICE $10 BIDDING, UNDERWRITING EUAC AW LIFELP, IP, MRP, INFLATION WARRANT refund YIELD SPOT ferences s4 55 56 0 BOU 120% 0 1 -_- Ha é o . DAS W I REALES DEMO99.m* 4 H0 ENG 08:59 08-11-2019

BOND J AND K

BOND - Microsoft Excel (Product Activation Failed) Add-Ins View - 2x Dr General Wrap Text Merge Merge & Center - Center Σ AutoSum : A Fill 2 Sort & m Find & SF $ % % , 4:0 .00 :.: Insert Delete Format Conditional Format Formatting as Table Styles Cell Styles 2 Clear Filter Editing Select Alignment Number Cells А F H I J K L M N O P File Home Insert Page Layout Formulas Data Review % Cut Calibri -11AA = = = Ea Copy Paste Format Painter BI U D- DA Clipboard Font F56 B C D E 38 39 BOND 40 COUPON 7.40% SEMI ANNUAL 41 YEARS 12 42 FV 1000 43 44 45 YTM = 7.80% BOND K COUPON YEARS FV 11.40% SEMI ANNUAL 12 1000 YTM = 7.80% 46 PRICE = 1277.28 EXCEL =PV(K45/2,K41*2,-K40*K42/2,-K42) 47 PRICE = 969.19 EXCEL =PV(C45/2,C41* 2,-C40*C42/2,-C42) 48 49 50 CASE 1 INTEREST RATE SUDDENLY RISES BY 2% 51 YTM 9.800% 52 PRICE 832.79 EXCEL = PV(C51/2,041*2,-(C40/2)*C42,-C42) INTEREST RATE SUDDENLY RISES BY 2% YTM 9.80% PRICE 1111.47 EXCEL=PV(K51/2,K41*2,-(K40/2)*K42,-K42) 53 54 ANS % CHANGE IN PRICE = (C52-C47)/C47 = -14.07% % CHANGE IN PRICE = (K52-K47)/K47 = -12.98% 55 56 57 58 ► Sheet2 AFN BANKING NOTE 51 53 CLEAN PRICE S10 BIDDING, UNDERWRITING EUAC AW LIFELP, IP, MRP, INFLATION WARRANT refund 0 YIELD SPOT 1 ferences S4 S5 S6 BOU 120% Rea -_- DO 4 * 4 0 ENG 08-11-2019

BOND - Microsoft Excel (Product Activation Failed) Add-Ins File Home Insert Page Layout Formulas Data Review View - 2x % Cut Σ AutoSum : A Fill 2 Sort & m Find & :.: Styles 2 Clear Formatting as Table Styles ber Filter Editing Select Cells I J K L M N O P INTEREST RATE SUDDENLY FALLS BY 2% YTM 5.80% PRICE 1479.34 EXCEL =PV(K60/2,K41*2,-(K40/2)*K42,-K42) Calibri -11AA = = = Dr Wrap Text General E Copy Paste Format Painter BI U D- DA Merge & Center - $ % , Clipboard Font Alignment Number A55 for A в с D E Η 55 56 57 58 59 INTEREST RATE SUDDENLY FALLS BY 2 % 60 CASE 2 YTM 5.800% 61 62 PRICE 1136.96 EXCEL PV(C60/2,C41*2,-(C40/2)*C42,-C42) 63 64 ANS % CHANGE IN PRICE = (C62-C47)/C47 = 17.31% 65 66 67 68 69 70 71 72 73 74 75 HEM YIELD SPOT Sheet2 AFN BANKING NOTE 51 53 CLEAN PRICE $10 BIDDING, UNDERWRITING Rea 1 ferences % CHANGE IN PRICE = (K62-K47)/K47 = 15.82% EUAC AW LIFELP, IP, MRP, INFLATION WARRANT refund s4 55 56 0 BOU 120% 0 -_- . B * 40 ENG 08-11-2019