Question
1. Bond Features Maturity (years) = 6 Face Value = $1,000 Starting Interest Rate 3.52% Coupon Rate = 3% Coupon dates (Annual) If interest rates
1.
| Bond Features | |
| Maturity (years) = | 6 |
| Face Value = | $1,000 |
| Starting Interest Rate | 3.52% |
| Coupon Rate = | 3% |
| Coupon dates (Annual) |
If interest rates change from 3.52% to 5.96% immediately after you buy the bond today (and stay at the new interest rate), what is the price effect in year 4 ?
State your answer to the nearest penny (e.g., 48.45)
If there is a loss, state your answer with a negative sign (e.g., -52.30)
2.ssume you buy a bond with the following features Bond maturity = 4 Coupon Rate = 5% Face Value = $1,000 Annual Coupons When you buy the bond the market interest rate = 3.82% Immediately after you buy the bond the interest rate changes to 6.44% What is the "reinvestment" effect in year 3 ?
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