Question

A bond is priced at $8,000 and has a duration of 4. What will the price of the bond be if interest rates increase by 2%? The bond price would fall to $7,360 The bond price would remain at $8,000 The bond price would fall to $7,520 The bond price would rise to $8,320

Name: a bond is priced at 8000 and has a duration of 4 what will the price of the bond be if interest rates increase by 2 the bond price would fall to 7360 the bond price would remain at 8000 the 31012
Uploaded: 2022-05-17T12:59:13-08:00
Duration: 1 min 15 s
Channel: Derrick Danso
Description: a bond is priced at 8000 and has a duration of 4 what will the price of the bond be if interest rates increase by 2 the bond price would fall to 7360 the bond price would remain at 8000 the 31012

          A bond is priced at $8,000 and has a duration of 4. What will the price of the bond be if interest rates increase by 2%?
The bond price would fall to $7,360
The bond price would remain at $8,000
The bond price would fall to $7,520
The bond price would rise to $8,320

a bond is priced at 8000 and has a duration of 4 what will the price of the bond be if interest rates increase by 2 the bond price would fall to 7360 the bond price would remain at 8000 the 31012

Added by Erin S.

Horngren’s Cost Accounting

Srikant M. Datar, Madhav V. Rajan 16th Edition

Instant Answer

Solved by Expert Derrick Danso

05/17/2022

Step 1

Step 1: The formula for the approximate change in bond price due to a change in interest rates is: $$ \frac{\Delta P}{P} \approx -D \times \Delta y $$ where: - $\Delta P$ is the change in bond price - $P$ is the initial bond price - $D$ is the duration of the Show more…

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A bond is priced at $8,000 and has a duration of 4. What will the price of the bond be if interest rates increase by 2%? The bond price would fall to $7,360 The bond price would remain at $8,000 The bond price would fall to $7,520 The bond price would rise to $8,320