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What is the price of the 4-year

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Q1. A 4-year 6.8% coupon bond is selling to yield 7%. The bond pays interest annually. One year later interest rates decrease from 6.8% to 6.2%.

1. What is the price of the 4-year 6.8% coupon bond selling to yield 7%?

2. What is the price of this bond one year later assuming the yield is unchanged at 7%?

3. What is the price of this bond one year later if instead of the coupon being unchanged the yield decreases to 6.2%?

4. What will be the price change attributable to moving to maturity (pull to par)?

5. What will be the price change attribute to an increase in the discount rate from 7% to 6.2%?

Reference no: EM133069507

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