An FI Purchases at Par Value a $100,000 Treasury Bond

Multiple Choice

An FI purchases at par value a $100,000 Treasury bond paying 10 percent interest with a 7.5 year duration.If interest rates rise by 4 percent, calculate the bond's new value. Recall that Treasury bonds pay interest semiannually.Use the duration valuation equation.

A) $28,572
B) $20,864
C) $15,000
D) $22,642
E) $71,428