- CFA Exams
- CFA Level I Exam
- Study Session 14. Fixed Income (1)
- Reading 44. Introduction to Fixed-Income Valuation
- Subject 2. Relationships between Bond Price and Bond Characteristics

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**CFA Practice Question**

A seven-year bond is selling for $89.78. The coupon is 7%, with payments being made semi-annually, and the market required yield is 9%. If the market-required yield drops to 8%, what will the amount of discount be?

A. $0.00

B. $4.94

C. $5.28

**Explanation:**N=14, I/Y=4, PMT=3.5, FV=100, PV=?=94.72, diff. = 100-94.72 = 5.28

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**User Contributed Comments**
9

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

shasha |
amount of discount: discount from FV! |

ruvardha |
please some one help me understand how to compute this question through calculator (ti) Ba 11 |

rkrazib |
N=7x2=14; I/Y=8/2=4; PMT=7/2=3.5; FV=Par Value=100; CPT>PV=94.72. So, the amount of dscount=Par value-PV=100-94.72=5.28 :) |

achu |
KEY: what will the amount of DISCOUNT be?- NOT "the change in bond price!" |

StanleyMo |
good questions, very tricky |

serboc |
trick question |

reganbaha |
fool me once, shame on you, fool me twice, shame on me. |

zeen1 |
took me five mins to find out my mistake.. good one... |

reaganm1 |
The answer to this question is easy, but it caught me out. |