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What will be the new price of the coupon bond

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Question - A 3.375%, 10-year bond with semi-annual coupon payments and a face value of $10,000 has just been sold at par.

a) Immediately after issuance, if the required return increases by 0.50% per year, compounded semi-annually, what will be the new price of the coupon bond?

b) What would happen to the price of the 10-year zero-coupon bond with a face value of $10,000 given this change in interest rate? 

c) What is the percentage change in the coupon bond, given the change in interest rates?

d) What is the percentage change in the zero-coupon bond, given the change in interest rates?

e) What causes the difference in the answers to part c) and part d)?

Reference no: EM132858648

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