Estimate the Percentage Price Change for a 5-Year $1,000 Par

question 25

Multiple Choice

Estimate the percentage price change for a 5-year $1,000 par value bond,with a 6% coupon,if the yield rises from 8% to 8.5%.Interest is paid semiannually.

• A) 2.1%
• B) -2.1%
• C) 4.4%
• D) -4.4%
• E) None of the above

---

Definitions:

Margin Deposits

Funds that an investor must deposit as collateral to borrow from a broker to buy securities, typically used for trading on margin.

Call Options

Financial derivatives that grant the holder the option to purchase stocks or other assets at a predetermined price before the option expires.

Put Options

A financial contract granting the owner the right, but not the obligation, to sell a specified amount of an underlying asset at a set price within a specified timeframe.

Break-Even Price

The market price that an asset must reach for an investor to recover their initial investment without making a profit or loss.