A 30-Year Zero Coupon Bond with a Face Value of $5,000

question 2

Multiple Choice

A 30-year zero coupon bond with a face value of $5,000 is currently selling for $1,156.88 and has a market rate of interest of 5%. Using the bond's modified duration, what is the approximate change in the price of the bond if interest rates fall to 4.25%?

• A) Increase of $285.70
• B) Increase of $247.90
• C) Decrease of $285.70
• D) Decrease of $247.90
• E) Not enough information is given to answer the question.

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