a 12 year, 5 % coupon bond pays interest annually. The bond has a face value of $1000. What is the change in price of this bond if the market yield rises to 6% from the current yield of 4.5%. please show math
Already Tried: I tried to take the pv of each bond at the new price. I am told the answer is 12+ percent
current yield = coupon payment/current market price
coupon payment = 5% of 1,000 = 50
If the current yield is 4.5%, then
Current market price = 50/4.5%
=$1,111.11
when the market yield rises to 6% then,
Market price = 50/6%
= $833.33
Change in the price of the bond ($1,111.11 - $833.33) is a decrease of $277.78
that answer is incorrect. I need a percentage indicating a 12 percent decrease.