Question
Use the excel spread sheet to calculate the (change in) bond prices and a standard calculator to calculate the relative change. Both bonds have a
Use the excel spread sheet to calculate the (change in) bond prices and a standard calculator to calculate the relative change. Both bonds have a face value of AUD 1000 and AUD 45 coupons. Bond A is due in 1 year and bond B is maturing in 10 years. The yield yesterday was 4.5%, therefore the price of both bonds is AUD 1000. How do the prices (present values) of the two bonds change if the market yield is increasing today to 5%? Which bond reacts stronger to the change in market yields?
The price of the 1 year bond increases to 1004.78 and the price of the 10Y bond increases to 1039.56.
The 10 year bond reacts much stronger than the 1 year bond.
The price of the 1 year bond decreases to 995.24 and the price of the 10Y bond decreases to 961.39.
The 10 year bond reacts much stronger than the 1 year bond.
The price of the 1 year bond decreases to 995.24 and the price of the 10Y bond decreases to 961.39.
The 1 year bond reacts much stronger than the 10 year bond.
The price of the 1 year bond increases to 1004.78 and the price of the 10Y bond increases to 1039.56.
The 1 year bond reacts much stronger than the 10 year bond.
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Corporate Finance For Dummies
Authors: Michael Taillard
2nd Edition
1119850312, 978-1119850311
