CFA Practice Question

There are 266 practice questions for this study session.

CFA Practice Question

What is the interest rate risk, in percentage price change, of a semi-annual-pay 9%, 15-year bond with an 8.5% yield if rates decrease by 50 and 75 basis points?
A. -4.00; -3.875%
B. -2.12%; -4.31
C. 4.28%; 6.51%
Explanation: Current price = 104.19. Full Valuation at -50 basis points = 108.65; +4.28%
Full Valuation at -75 basis points = 110.97; +6.51%

User Contributed Comments 6

User Comment
Melle How do I get the current price of 104.19?
xxxx use your calculator to calculate the bond price (PV)
synner set I/Y= 4.25, pv=104.19
I/Y=(8.5-.5)/2=4, PV=108.65
I/Y=(8.5-.75)/2=3.875, PV=110.97

With PMT=4.5, FV=100, N=30 CPT PV
dealsoutlook n = 15*2, i/y = (8.5/2) = 4.25, fv = 100, pmt = (.09/2)*100, cpt pv
do the same and change interest rate to (8.5-.5)/2 and (8.5-.75)/2 for decrease in bp and cpt pv for each
AkuK Answer C is the only one with positive % change. the Question asks for %P change when rates decrease (i.e. P go up).
dream007 I agree that the answer is C without working it out. But the questions asked for percentage price change. what we seem to have here is nominal price I missing something?
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