Bond Valuation

Assume that a 20-year corporate bond has a $1,000 face value and pays semiannual coupons at 11% per annum and that the yield to maturity is 8.5%.

What is the price of the bond? [5 marks]

If the yield to maturity decreases to 7.80% per annum with semiannual payments, what price with the bond trade for? [5 marks]

By what percentage will the price of the bond change if the yield to maturity decreases from 8.50% to 7.80%? [2 marks]