How Much Would an Investor Lose If She Purchased a 30-Year

How much would an investor lose if she purchased a 30-year zero-coupon bond with a $1,000 par value and 10% yield to maturity, only to see market interest rates increase to 12% one year later? (Hint: How much would the price change from a year earlier?)

A) $19.93
B) $20.00
C) $23.93
D) $25.66 Price = 1,000/(1.10) 30 = 57.31
New Price = 1,000/(1.12) 29= 37.38

Correct Answer:

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