This preview shows pages 1–2. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
Unformatted text preview: coupon period has 181 days. What is the invoice price of the bond in (a) now? 3. Bond Prices and Interest Rates Consider the following three bonds: A, a 1year zerocoupon bond; B, a 10year zerocoupon bond; and C, a 10year bond with a 5% coupon. The face value of all the three bonds is $1,000. Suppose the interest rate is 6% for all maturities. (a) The interest rate increases to 8% for all maturities. Will the prices of the three bonds increase or decrease? (No calculations necessary). (b) The interest rate increases to 8% for all maturities. Will the percentage change in the price of A bigger than that of B? Why or why not? (No calculations necessary). (c) The interest rate increases to 8% for all maturities. Will the percentage change in the price of B bigger than that of C? Why or why not? (No calculations necessary). 4. Recommended Problems from the Textbook (BKM) Effective annual yield: Chapter 14 Problems 6 and 7 (P.501)...
View
Full
Document
 Spring '11
 Darwin
 Interest

Click to edit the document details