Matching Duration to Time Horizon

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cfa_mixer

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Bond has following Characteristics
10% coupon semiannual payments
current price 909.08
YTM 12.5%
5 years to maturity
duration 4 years
current investor has 4 year time horizon , assume that YTM for bond goes up to 14% tomorrow and remains at 14% for the rest of the 4 year horizon.
Can anyone explain why on this god forsaken earth the price of the bond 4 years from now is 963.84?
 
thx friend.
Tell me, why didnt the below work for me.
N = 8
I/Y = 7%
PV = -909.08
PMT = 50
Solve for FV gave me 1048.98 instead. Why is my logic incorrect?
 
Because the $909.08 price is based on the 12.5% YTM, not the 14% YTM.
As soon as the YTM jumps to 14%, the price drops to $859.93.
 
The bond originally had 5 years to maturity.
He asked for the price four years from now: one year (left) to maturity.
 
That is what the price of a 1 year bond (after 4 years have passed only 1 year is left) with a 10% coupon payment and a 14% YTM
on the calculator- adjust to semi-annual compounding
N=2
I/Y=7
PMT=50
FV=1000
CPT—- PV = -963.839 - so it would cost 963.84
 
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