Essentials Of Investments
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ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Transcribed Image Text:**Price Sensitivity of 8% Coupon Bond with Semi-Annual Payments**
This table illustrates the price sensitivity of an 8% coupon bond with varying interest rates and maturities. The bond has a face value of $1,000.
| | **10%** | **8%** | **6%** | **Range** |
|----------|---------|---------|-----------|-----------|
| **Maturity** | | | | |
| 2 | $1,000 | $1,000 | $1,037.2 | |
| 5 | $922.8 | $1,000 | $1,120 | |
| 10 | $875.4 | $1,000 | $1,231.2 | |
| 20 | | $1,000 | | |
**Explanation:**
- The columns represent different yield rates (10%, 8%, and 6%).
- The rows indicate years to maturity (2, 5, 10, and 20).
- The bond price changes with varying yield rates, showing how sensitive the bond price is to these changes.
- At an 8% yield rate, the bond price equates to its face value of $1,000 across all maturities.
- The "Range" column provides a comparison of bond prices at the lowest and highest yield rates.
This data assists in understanding the impact of interest rate fluctuations on bond pricing.
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