Consider the following coupon bond issued by XYZ.inc Term: 3 years Payment: 75 Face Value: 1,000 Currently the prevailing risk free rate is 0.02 and the market places a risk premium on XYZ.inc bonds of 0.02 Suppose the risk premium decreases by 0.02 Compute the change in the bond price.

Consider the following coupon bond issued by XYZ.inc Term: 3 years Payment: 75 Face Value: 1,000 Currently the prevailing risk free rate is 0.02 and the market places a risk premium on XYZ.inc bonds of 0.02 Suppose the risk premium decreases by 0.02 Compute the change in the bond price.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

Consider the following coupon bond issued by XYZ.inc
Term: 3 years
Payment: 75
Face Value: 1,000
Currently the prevailing risk free rate is 0.02 and the market places a risk premium
on XYZ.inc bonds of 0.02
Suppose the risk premium decreases by 0.02
Compute the change in the bond price.
Record your unitless answer to the nearest cent.
Your Answer:

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