5.A zero-coupon bond is bond that does not pay coupon interests. Return on such a bond all comes from capital gain yield, i.e. you pay $900 today and get the face value of $1,000 at maturity, but you do not receive any coupon payments.

A bond trader purchased each of the following bonds at a yield to maturity of 8%. Immediately after she purchased the bond, interest rates fell to 7%. What is the percentage change in the price of each bond after the decline in interest rates? Fill in the following table.

Price at 8%

Price at 7%

Pctge. change

10-year, 10% semi-annual coupon

5-year zero

15-year zero

$5 perpetuity

5.A zero-coupon bond is bond that does not pay coupon interests. Return on such a bond all comes from capital gain yield, i.e. you pay $900 today and get the face value of $1,000 at maturity, but you do not receive any coupon payments. A bond trader purchased each of the following bonds at a yield to maturity of 8%. Immediately after she purchased the bond, interest rates fell to 7%. What is the percentage change in the price of each bond after the decline in interest rates? Fill in the following table. Price at 8% 10-year, 10% semiannual coupon 5-year zero 15-year zero $5 perpetuity Price at 7% Pctge. change