Consider a zero coupon bond with 20 years to maturity. The percentage change in the price of the bond if its yield to maturity decreases from 7% to 5% is closest to:

Question

986 viewsOctober 17, 2016

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Darshita 6.14K October 17, 2016 0 Comments

Question 17 options:

A)

38%

B)

17%

C)

22%

D)

46%

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score 0 · Answer 1 · 2016-10-17T11:29:36+00:00

nswer D =46.%

Working notes for the above answer

Decrese in the percentage is 2% (7%-5%)

The returne over 20 years will be as follow

(1.02)20

=45.68

is close to 46%

So the answer is 46%

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