Answer:
The change in price is $36.91
Explanation:
Using the present value pv formula in excel the price of the bond now and in one year's time can be computed:
=pv(rate,nper,pmt,fv)
rate is the yield to maturity which is 6.5% and 6% respectively
nper is the number of years to maturity which is 10 years and 9 years respectively
pmt is the periodic payment of coupon 5.75%*$1000=$57.5
fv is the value receivable on redemption which is $1000 in both cases
=pv(6.5%,10,57.5,1000)
pv=$946.08
=pv(6.00%,9,57.5,1000)
pv=$983.00
Change in price =$983.00 -$946.08 =$36.91
Find attached.
