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A 20-year 10% annual-coupon bond with a face value of $1,000 is purchased at a time when the interest rate in the market is 7%.
A 20-year 10% annual-coupon bond with a face value of $1,000 is purchased at a time when the interest rate in the market is 7%. Immediately after the 8th coupon payment, the interest rate in the market is 11%. The book value of the bond immediately after the 8th coupon payment is BV, and the market value of the bond immediately after the 8th coupon payment is MV. Find the difference, BV - MV.
Answer: 303.20 [If you didn't get this answer the solution is incorrect. Please explain and write it out throughly if possible]
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