A Bond That Pays Interest Semiannually Has a 6% Promised

question 40

Multiple Choice

A bond that pays interest semiannually has a 6% promised yield and a price of $1045. Annual interest rates are now projected to increase 50 basis points. The bond's duration is 5 years. What is the predicted new bond price after the interest rate change? (Watch your rounding.)

• A) $1020.35
• B) $1069.65
• C) $1070.36
• D) $1019.64
• E) None of the above ((-5/1.03)  0.0050  $1045) + $1045

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