To calculate the actual percentage change in the bond's price, use the present value formula to determine the current price and then calculate the new price based on the yield to maturity after the change in yields.
Finally, calculate the actual percentage change in the bond's price.
To calculate the actual percentage change in the bond's price, we need to first determine the current price of the bond.
Using the formula for present value of a bond, we can calculate the current price as:
- PV = C (1 - (1 + r)^(-n)) / r + F (1 + r)^(-n)
Where PV is the present value, C is the coupon payment, r is the yield to maturity per period, n is the number of periods, and F is the face value of the bond.
Once we have the current price of the bond, we can calculate the new price using the yield to maturity after the change in yields.
Finally, we can calculate the actual percentage change in the bond's price as:
- Percentage change = (New price - Current price) / Current price * 100