- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 2. Time Value of Money in Finance
- Subject 2. Fixed Income Instruments and the Time Value of Money
CFA Practice Question
The price of a 15-year, semi-annual pay, 8% coupon bond increases by 9.53% if the bond's yield to maturity decreases by 100 basis points, from 7% to 6%. The percentage change in the bond's price caused by a decrease in yield to maturity from 10% to 9% is:
A. 7.89%
B. 8.21%
C. 8.54%
Explanation: To yield 10%, this bond's price would be $846.28. To yield 9%, its price would be $918.55.
User Contributed Comments 9
| User | Comment |
|---|---|
| hrai1 | can we use duration calculation to do this problem? |
| myanmar | N:30,I/Y:5,PMT:4,FV100 CPT:PV=84,6275 N:30,I/Y:4.5,PMT:4,FV:100 CPT:PV=91,8556 91,8556/84,6275-1=8,54% |
| labsbamb | understand the concept with the financial calculator, but since we `re dealing with bonds, why we don`t take FV=1000 ? |
| Shelton | 1. Nonlinear curve 2. N=30, I=5, PMT=4, FV=100 => -PV (sto1) then I=4.5 => -PV (sto2) rcl1/rcl2-1=8.54% |
| seemor | i am calculating this formula on my financial calculator, why am I not getting the right answer. |
| whoi | seemor: Enter into your Calculator (presumably HP 12c): "PMT": 40 "n": 30 "i": 4.5 "FV": 1000 => Press "PV" result equals 918.556 "PMT": 40 "n": 30 "i": 5 "FV" : 1000 => Press "PV" result equals : 846.275 Take Relation: 918/846 -1 = 8.54% |
| clarelau | remember to clear data each time, otherwise, you may get wrong answer |
| rk_ash | Wondering if we can use 'duration' concept here? |
| pveace | Check if your calculator is not in a BGN mode |