- CFA Exams
- CFA Exam: Level I 2021
- Study Session 14. Fixed Income (1)
- Reading 44. Introduction to Fixed-Income Valuation
- Subject 1. Bond Prices and the Time Value of Money

###
**CFA Practice Question**

What is the estimated new price of a semi-annual-pay 9%, 15-year bond with an 8.5% yield if rates decrease by 25 basis points?

B. 104.19

C. 106.39

A. 58.76

B. 104.19

C. 106.39

Correct Answer: C

New Price = 106.39. PMT=4.5, FV=100, N=30, I/YR=8.25/2=4.125

###
**User Contributed Comments**
8

User |
Comment |
---|---|

sivenkova |
Why 8,25? In the task it is stated as 8,5? Is it a mistake? |

alki |
yield decreases 25 bps to 8.25 |

Oarona |
Thanks Alki. Good observation |

jonan203 |
dude, this question is like one sentence long and you missed "rates decrease 25 basis points"? |

praj24 |
how did you know.... FV = 100? |

ocshing |
praj24 I just tried with par value of 1000 and I get PV=1063.87..you can't simply go wrong whether you have chosen FV=100 or 1000 |

ascruggs92 |
praj24, please, for your own good, read the notes. |

khalifa92 |
guys always read slowly and try to understand the question properly because trying to solve fast and move on |