CFA Practice Question

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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
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)
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
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