The relationship of bond prices and changes in bond yields

Reference no: EM13666318

A Treasury bond with £100 maturity value has a £8 annual coupon and 5 years left to maturity.
i. What price will the bond sell for assuming that the 5-year yield to maturity in the market is 7%. (Show your calculations)
ii. What would be your answer to part (i) if the 5-year yield to maturity in the market is 9%. (Show your calculations)
iii. What does your answer to parts (i) and (ii) tell you about the relationship of bond prices and changes in bond yields?

Reference no: EM13666318

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