Question

Question 12 What happens to the price of a three-year, par value bond with an 8% coupon when interest rates change from 8% to 6%?Decrease of $53.46 Increase of $53.46 Increase of $1,053.46 Decrease of $1,000 Increase of $1,000 Decrease of $1,053.46 1 pts

          Question 12
What happens to the price of a three-year, par value bond with an 8% coupon when interest
rates change from 8% to 6%?Decrease of $53.46
Increase of $53.46
Increase of $1,053.46
Decrease of $1,000
Increase of $1,000
Decrease of $1,053.46
1 pts

Question 12
What happens to the price of a three-year, par value bond with an 8% coupon when interest
rates change from 8% to 6%?Decrease of $53.46
Increase of 53.46
Increase of1,053.46
Decrease of 1,000
Increase of1,000
Decrease of 1,053.46
1 pts

Added by Clara M.

Principles of Economics

Gregory Mankiw 8th Edition

Instant Answer

Solved by Expert Akash M

11/14/2023

Step 1

Using the formula for the present value of a bond: PV = C * (1 - (1 + r)^-n) / r + F / (1 + r)^n Where: PV = Present value of the bond C = Coupon payment per period ($80 = 0.08 * $1000) r = Interest rate per period (6% or 0.06) n = Number of periods (3 years) F Show more…

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What happens to the price of a $1000 face value, three year bond with an 8% coupon when interest rates change from 8% to 6%? A. No change in price B. Price increases C. Price equal to face value D. Price decreases Question 12 1 pts What happens to the price of a three-year, par value bond with an 8% coupon when interest rates change from 8% to 6%? Decrease of $53.46 Increase of $53.46 Increase of $1,053.46 Decrease of $1,000 Increase of $1,000 Decrease of$1,053.46