An FI Purchases at Par Value a $100 000 Treasury

Multiple Choice

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

A) +$28 571.43
B) -$20 864.46
C) +$20 864.46
D) -$28 571.43