How Much Would an Investor Lose If She Purchased a 30-Year

question 110

Multiple Choice

How much would an investor lose if she purchased a 30-year zero-coupon bond with a $1,000 par value and 10% yield to maturity, only to see market interest rates increase to 12% one year later? (Hint: How much would the price change from a year earlier?)

• A)$19.93
• B)$20.00
• C)$23.93
• D)$25.66 Price = 1,000/(1.10)30 = 57.31
• New Price = 1,000/(1.12)29= 37.38

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