Question
Caterpillar Inc. has issued bonds with semi-annual coupon payments on a coupon rate of 8.50% p.a. The bonds will mature in 6 years' time
Caterpillar Inc. has issued bonds with semi-annual coupon payments on a coupon rate of 8.50% p.a. The bonds will mature in 6 years' time and have a principal amount of $1,000. These are priced using a yield of 12% p.a. compounded semi-annually. Suppose the yield rose immediately to 14% p.a. compounded semi- annually. Which of the following would describe the change in the price of this bond? Your response must be entered as a positive (increase) or negative (decrease) numerical value with 2 decimal places and excluding the dollar sign ($).
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Answer The price of the bond would decrease by 13333 Explanation The reason for this is that when the yield goes up it means that investors are demand...Get Instant Access to Expert-Tailored Solutions
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Get StartedRecommended Textbook for
Business Math
Authors: Cheryl Cleaves, Margie Hobbs, Jeffrey Noble
10th edition
133011208, 978-0321924308, 321924304, 978-0133011203
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