Annual coupon bond with a face value

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Reference no: EM131456258

Consider an eight-year, 13 percent annual coupon bond with a face value of $1,000. The bond is trading at a rate of 10 percent.

1. What is the price of the bond

2. If the rate of interest increases by 1% what will the bonds new price be?

3. Using your answers to party 1 & 2 what is the percentage change in the bonds price as a result of the 1% increase in interest rates?

4. Repeat parts 2 & 3 assuming a 1% decrease in interest rates, what with the bonds new price be? and what is the percentage change?

Reference no: EM131456258

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