xodiana
Jul 18, 2008, 06:07 PM
You own a bond that pays a 12% annualized semi-annual coupon rate. The bond has 10 years to maturity. If the discount rate suddenly moves from 14% to 16%, then what is the dollar increase (decrease) in value for the bond?
When I worked this problem for the 14% discount I 895.68 when I added the PV of coupons & PV of principal. Then for the 16% discount I got 806.67 when I added the PV of coupons and PV of principal, which would make the difference an 89.01 decrease. The answer in the book says it should be a 90.42 difference. I don't know what I did wrong or if the answer I got is correct and the book made a mistake.
When I worked this problem for the 14% discount I 895.68 when I added the PV of coupons & PV of principal. Then for the 16% discount I got 806.67 when I added the PV of coupons and PV of principal, which would make the difference an 89.01 decrease. The answer in the book says it should be a 90.42 difference. I don't know what I did wrong or if the answer I got is correct and the book made a mistake.