ok see what you mean. my mistake…
nm
Let the coupon be x, x/P=0.09, or x=.09P Take a 4 year annual pay bond, fv=100 x{1/1.08+1/1.08^2+1/1.08^3+1/1.08^4}+100/1.08^4=P=(1/0.09)x 3.3121x+73.503=11.11x x=9.42% Close enough? I suspect it depends highly on your choice of maturity, payment schedule though.
agree answer should be D…thx chad chadtap Wrote: ------------------------------------------------------- > Discount Bond: CRCY>YTM > Par = CR = CY = YTM
The answer is D…
There will be only 1 maturity with coupon=10% and CY=9%, which is kind of misleading when you look at the question. It isn’t mathematically possible to have coupon=9% and CY=9% so I retract my argument, but for any coupon>9% there should be a maturity that will make it work.
A bond has a duration of 10, a yield to maturity of 9% and a price of $103. Which of the following could be the exact new price of the bond, if its yield to maturity increases to 10%? A. 92.65 B. 92.70 C. 92.75 D. 113.30 price percentage page: -10*(+1%)=-10% new price( est.)=103*0.9=92.7 + convexity: C
which could be the EXACT?? new price when you have something like that you almost assume no convexity. what tells you that is the exact new price