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Consider a bond selling at par ($100) with a coupon rate of 6% and 10 years to maturity. a) What is the price of this bond if the yield is 15%?
Consider a bond selling at par ($100) with a coupon rate of 6% and 10 years to maturity. a) What is the price of this bond if the yield is 15%? b) What is the price of this bond if the yield increases from 15% to 16%, and by what percentage did the price of this bond change? 1 c) What is the price of this bond if the yield is 5%? d) What is the price of this bond if the yield increases from 5% to 6%, and by what percentage did the price of this bond change? e) From your answers to parts b and d, what can you say about the relative price volatility of a bond in a high-interest-rate environment compared to a low-interest-rate environment?
