A bond trader purchased each of the following bonds at a yield to maturityof 8%. Immediately after she purchased the bonds, interest rates fell to 7%.What is the percentage change in the price of each bond after the decline ininterest rates?

A bond trader purchased each of the following bonds at a yield to maturityof 8%. Immediately after she purchased the bonds, interest rates fell to 7%.What is the percentage change in the price of each bond after the decline ininterest rates?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 16P: Interest Rate Sensitivity A bond trader purchased each of the following bonds at a yield to maturity...

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Concept explainers

Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.

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A bond trader purchased each of the following bonds at a yield to maturity
of 8%. Immediately after she purchased the bonds, interest rates fell to 7%.
What is the percentage change in the price of each bond after the decline in
interest rates?

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