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What is the approximate change in the market price

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Q1. Consider a one-year maturity, $100,000 face value bond that pays a 6 percent fixed coupon annually. If the bond is selling at par, what is the percentage price change for the bond if interest rates increase 50 basis points from 6 percent?

Q2. Consider a five-year, 8 percent annual coupon bond selling at par of $1,000.

a. What is the duration of this bond?

b. If interest rates increase by 20 basis points, what is the approximate change in the market price using the duration approximation?

Reference no: EM132986180

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