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One year ago, you purchased a $1,000 face value bond for a clean price of $980. The bond currently has seven years remaining until maturity, pays a coupon payment of $45 every six months, and has a yield to maturity of 6.87 percent. What is the percentage change in the bond price over the past year?
A. -6.24 percent.B. –14.70 percent.C. 15.48 percent.D. 13.96 percent.E. 6.61 percent.

Respuesta :

Answer:

change of bond price increase is 13.96

so option D is correct

Explanation:

given data

face value bond = $1000

clean price = $980

coupon payment = $45 per six months

yield r = 6.87 % = 6.87/2 = 3.435% = 0.03435

time t = 7 ×2 = 14 year

to find out

change in the bond price

solution

we find bond price  first so

we will apply here formula that is

bond price = coupon payment ( 1- [tex](1/1+r)^{t}[/tex] / r + ( face value/ [tex](1+r)^{t}[/tex]   .............................1

put here all value

bond price = 45 ( 1- [tex](1/1+0.03435)^{14}[/tex] / 0.03435 + ( 1000 / [tex](1+0.03435)^{14}[/tex]

bond price = 1116.81

so here change in price is = bond price - clean price

change in price  = 1116.81 - 980

change in price  = $136.813

so change of price increase = change in price / clean price × 100

change of price increase =136.813 / 980 × 100

change of bond price increase is 13.96

so option D is correct

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