标题: Bond Pricing [打印本页] 作者: clearlycanadian 时间: 2011-7-13 16:10 标题: Bond Pricing
Can someone explain this:
Consider a bond that pays an annual coupon of 5% and that has three years remaining until maturity. Assume the term structure of interest rates is flat at 6%. If the term structure of interest rates does not change over the next twelve-month interval, the bond's price change (as a percentage of par) will be closest to:
Answer:
The bond price change is computed as follows:
Bond Price Change = New Price − Old Price = (5/1.06 + 105/1.062) − (5/1.06 + 5/1.062 + 105/1.063) = 98.17 − 97.33 = 0.84.
I don't understand the logic behind the new price and the old price.作者: Mechanic 时间: 2011-7-13 16:10
Is it asking for the price change between now and 12 months on?作者: evolsteevol 时间: 2011-7-13 16:10
You're just discounting the coupon on the bond at 6%, and finding
the price of the bond for t=3 and t=2, and then taking the % change of the two
Its the same as saying the price is 90 with 3 ytm and 92 or whatever
with 2 ytm. 6% dis rate is consant.作者: Bluetick1010 时间: 2011-7-13 16:10
Look at it this way
1ST BOND
FV=100
PMT=5
n=3
i=6
2ND BOND
Same as first except now n=2 (12 months closer to maturity)
P1=97.33
P2=98.16
Percent change in price = Change in price/P
The logic behind the price change with no change in interest rates is that as a bond gets closer to redemption its price is pulled toward par value
