You Own a 7

question 9

Multiple Choice

You own a 7.5%, semiannual coupon bond that matures in 10 years. The par value is $1,000 and the current yield to maturity is 6.5%. What will the percentage change in the price of your bond be if the yield to maturity suddenly increases by 50 basis points?

• A)−3.25%
• B)−3.30%
• C)−3.35%
• D)−3.40%
• E)−3.47%

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Definitions:

Money Supply

The comprehensive pool of financial assets in an economy at any given time, which includes coins, cash, and the amounts in both checking and savings accounts.

Inflation

The rate at which the general level of prices for goods and services is rising, subsequently eroding purchasing power.

Unemployment

The condition in which people actively seeking work are unable to find employment.

Long Run

The long run is a period in economics in which all factors of production and costs are variable, allowing for full adjustment to change.