Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A bond has a Macaulay duration of 7.00 and is priced to yield 5.0%. If interest rates go up so that the yield goes to

image text in transcribed

A bond has a Macaulay duration of 7.00 and is priced to yield 5.0%. If interest rates go up so that the yield goes to 5.5%, what will be the percentage change in the price of the bond? Now, if the yield on this bond goes down to 4.5%, what will be the bond's percentage change in price ? Comment on your findings. If interest rates go up to 5.5%, the percentage change in the price of the bond is %. (Round to two decimal places.) If interest rates go down to 4.5%, the percentage change in the price of the bond is %. (Round to two decimal places.) Comment on your findings. (Select the best answer below.) O A. As interest rates increase or decrease, the price of the bond remains the same. O B. As interest rates increase or decrease, the price of the bond will always increase. O c. As interest rates increase, the price of the bond decreases. As interest rates decrease, the price of the bond increases. OD. As interest rates decrease, the price of the bond decreases. As interest rates increase, the price of the bond increases

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Focus On Personal Finance

Authors: Jack Kapoor, Les Dlabay, Robert J. Hughes, Melissa Hart

7th Edition

1265521972, 978-1265521974

More Books

Students also viewed these Finance questions