Q1. A 4-year 6.8% coupon bond is selling to yield 7%. The bond pays interest annually. One year later interest rates dec

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answerhappygod
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Q1. A 4-year 6.8% coupon bond is selling to yield 7%. The bond pays interest annually. One year later interest rates dec

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Q1. A 4-year 6.8% coupon bond is selling to yield 7%. The bond
pays interest annually. One year later interest rates decrease from
7% to 6.2%.
2.1. What is the price of the 4-year 6.8% coupon bond selling to
yield 7%?
2.2. What is the price of this bond one year later assuming the
yield is unchanged at 7%?
2.3. What is the price of this bond one year later if instead of
the yield being unchanged the
yield decreases to 6.2%?
2.4. What will be the price change attributable to moving to
maturity (pull to par)?
2.5. What will be the price change attribute to an increase in
the discount rate from 7% to
6.2%?
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