One year ago, alpha supply issued 15-year bonds at par. the bonds have a coupon rate of 6.5 percent, paid semiannually, and a face value of $1,000. today, the market yield on these bonds is 7.2 percent. what is the percentage change in the bond price over the past year? a) 5.94 percentb) 5.38 percentc) -6.11 percentd) -5.87 percente) the bond price did not change

option (C) - 6.11%

Explanation:

Data provided :

Coupon rate one year ago = 6.5% = 0.065

Semiannual coupon rate = = 0.0325

Face value = $1,000

Present market yield = 7.2% = 0.072

Semiannual Present market yield, r = = 0.036

Now,

With semiannual coupon rate bond price one year ago, C

= 0.0325 × $1,000

= $32.5

Total period in 15 years = 15 year - 1 year = 14 year

or

n = 14 × 2 = 28 semiannual periods

Therefore,

The present value =

=

or

= $32.5 × 17.4591 + $1,000 × 0.37147

= $567.42 + $371.47

= $938.89

Hence,

The percent change in bond price =

=

= - 6.11%

therefore,

the correct answer is option (C) - 6.11%

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