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Bond Pricing

If someone pays you 1 cent every day for the rest of eternity, is that worth infinity dollars?

Excel in math and science

Master concepts by solving fun, challenging problems.

It's hard to learn from lectures and videos

Learn more effectively through short, conceptual quizzes.

Our wiki is made for math and science

Master advanced concepts through explanations,
examples, and problems from the community.

Used and loved by 4 million people

Learn from a vibrant community of students and enthusiasts,
including olympiad champions, researchers, and professionals.

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Challenge Quizzes

Level 1
Level 2-3

Bond Pricing: Level 2-3 Challenges

An investor bought a bond with a constant coupon rate for $1000 with a current yield of 10%. If the yield rises to 11%, what happens to the price?

Image credit: Wikipedia Daderot

Stays the same Decreases to $900 Increases to $1100 Increases to $1111 Decreases to $909 Depends on term structure

Excel in math and science

Master concepts by solving fun, challenging problems.

It's hard to learn from lectures and videos

Learn more effectively through short, conceptual quizzes.

Our wiki is made for math and science

Master advanced concepts through explanations,
examples, and problems from the community.

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by Calvin Lin

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Which of the following bonds, issued by the same corporation, would have the highest price volatility?

10% coupon rate with 10 years to maturity 2% coupon rate with 10 years to maturity 10% coupon rate with 2 years to maturity 2% coupon rate with 2 years to maturity

Excel in math and science

Master concepts by solving fun, challenging problems.

It's hard to learn from lectures and videos

Learn more effectively through short, conceptual quizzes.

Our wiki is made for math and science

Master advanced concepts through explanations,
examples, and problems from the community.

Used and loved by 4 million people

Learn from a vibrant community of students and enthusiasts,
including olympiad champions, researchers, and professionals.

Your answer seems reasonable. Find out if you're right!

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View solution

by Calvin Lin

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If you believe that interest rates will rise soon, which of the following bond trades should you make (to maximize your percentage return)?

Buy a 2 year zero coupon bond Sell a 2 year zero coupon bond Buy a 2 year 10% bond Sell a 2 year 10% bond

Excel in math and science

Master concepts by solving fun, challenging problems.

It's hard to learn from lectures and videos

Learn more effectively through short, conceptual quizzes.

Our wiki is made for math and science

Master advanced concepts through explanations,
examples, and problems from the community.

Used and loved by 4 million people

Learn from a vibrant community of students and enthusiasts,
including olympiad champions, researchers, and professionals.

Your answer seems reasonable. Find out if you're right!

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by Calvin Lin

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What is the dollar duration (in $) of a $100 bond that pays 10% coupon rate for 5 years, with a constant yield curve of 6%?

Excel in math and science

Master concepts by solving fun, challenging problems.

It's hard to learn from lectures and videos

Learn more effectively through short, conceptual quizzes.

Our wiki is made for math and science

Master advanced concepts through explanations,
examples, and problems from the community.

Used and loved by 4 million people

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Your answer seems reasonable. Find out if you're right!

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by Calvin Lin

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You own a bond that will pay 7% per year for the next 10 years, on a principal of $20,000. If the prevailing discount rate is 10% throughout, what is the bond worth now?

Excel in math and science

Master concepts by solving fun, challenging problems.

It's hard to learn from lectures and videos

Learn more effectively through short, conceptual quizzes.

Our wiki is made for math and science

Master advanced concepts through explanations,
examples, and problems from the community.

Used and loved by 4 million people

Learn from a vibrant community of students and enthusiasts,
including olympiad champions, researchers, and professionals.

Your answer seems reasonable. Find out if you're right!

That seems reasonable. Find out if you're right!

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New user? Sign up

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View solution

by Calvin Lin

Are you sure you want to view the solution?

Cancel Yes I'm sure

Waste less time on Facebook — follow Brilliant.

Excel in math and science

Master concepts by solving fun, challenging problems.

It's hard to learn from lectures and videos

Learn more effectively through short, conceptual quizzes.

Our wiki is made for math and science

Master advanced concepts through explanations, examples, and problems from the community.

Used and loved by 4 million people

Learn from a vibrant community of students and enthusiasts, including olympiad champions, researchers, and professionals.

Courses

Topics

Community

100 Day Summer Challenge

Bond Pricing

Excel in math and science

Master concepts by solving fun, challenging problems.

It's hard to learn from lectures and videos

Learn more effectively through short, conceptual quizzes.

Our wiki is made for math and science

Master advanced concepts through explanations, examples, and problems from the community.

Used and loved by 4 million people

Learn from a vibrant community of students and enthusiasts, including olympiad champions, researchers, and professionals.

Challenge Quizzes

Bond Pricing: Level 2-3 Challenges

Image credit: Wikipedia Daderot

Excel in math and science

Master concepts by solving fun, challenging problems.

It's hard to learn from lectures and videos

Learn more effectively through short, conceptual quizzes.

Our wiki is made for math and science

Master advanced concepts through explanations, examples, and problems from the community.

Used and loved by 4 million people

Learn from a vibrant community of students and enthusiasts, including olympiad champions, researchers, and professionals.

Excel in math and science

Master concepts by solving fun, challenging problems.

It's hard to learn from lectures and videos

Learn more effectively through short, conceptual quizzes.

Our wiki is made for math and science

Master advanced concepts through explanations, examples, and problems from the community.

Used and loved by 4 million people

Learn from a vibrant community of students and enthusiasts, including olympiad champions, researchers, and professionals.

Excel in math and science

Master concepts by solving fun, challenging problems.

It's hard to learn from lectures and videos

Learn more effectively through short, conceptual quizzes.

Our wiki is made for math and science

Master advanced concepts through explanations, examples, and problems from the community.

Used and loved by 4 million people

Learn from a vibrant community of students and enthusiasts, including olympiad champions, researchers, and professionals.

Excel in math and science

Master concepts by solving fun, challenging problems.

It's hard to learn from lectures and videos

Learn more effectively through short, conceptual quizzes.

Our wiki is made for math and science

Master advanced concepts through explanations, examples, and problems from the community.

Used and loved by 4 million people

Learn from a vibrant community of students and enthusiasts, including olympiad champions, researchers, and professionals.

Excel in math and science

Master concepts by solving fun, challenging problems.

It's hard to learn from lectures and videos

Learn more effectively through short, conceptual quizzes.

Our wiki is made for math and science

Master advanced concepts through explanations, examples, and problems from the community.

Used and loved by 4 million people

Learn from a vibrant community of students and enthusiasts, including olympiad champions, researchers, and professionals.

Master advanced concepts through explanations,
examples, and problems from the community.

Learn from a vibrant community of students and enthusiasts,
including olympiad champions, researchers, and professionals.

Master advanced concepts through explanations,
examples, and problems from the community.

Learn from a vibrant community of students and enthusiasts,
including olympiad champions, researchers, and professionals.

Master advanced concepts through explanations,
examples, and problems from the community.

Learn from a vibrant community of students and enthusiasts,
including olympiad champions, researchers, and professionals.

Master advanced concepts through explanations,
examples, and problems from the community.

Learn from a vibrant community of students and enthusiasts,
including olympiad champions, researchers, and professionals.

Master advanced concepts through explanations,
examples, and problems from the community.

Learn from a vibrant community of students and enthusiasts,
including olympiad champions, researchers, and professionals.

Master advanced concepts through explanations,
examples, and problems from the community.

Learn from a vibrant community of students and enthusiasts,
including olympiad champions, researchers, and professionals.

Master advanced concepts through explanations,
examples, and problems from the community.

Learn from a vibrant community of students and enthusiasts,
including olympiad champions, researchers, and professionals.