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A 10-year bond has face value (redemption value) $150,000 and quarterly coupons of 3.5%. Consider the time right after the 12th coupon has been paid,
A 10-year bond has face value (redemption value) $150,000 and quarterly coupons of 3.5%. Consider the time right after the 12th coupon has been paid, when the yield is 5.2%. |
(a) | What is the price of the bond? |
(b) | Compute the price of the bond if the yield were to increase by 1 basis point (a basis point is 1/100 of 1%). What is the absolute value of the difference between that price, and your answer to part a)? |
(c) | Would the yield have to increase or decrease in order for the bond to increase in value by $494.98? |
(d) | Based only on your answer to b), approximately how many basis points (bp) would the yield have to move in order for the bond to increase in value by $494.98? (Answer as a positive integer. |
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