A government bond currently carries a yield to maturity of 6 percent and a market price of $1,168.49. If the bond promises to pay $100 in interest annually for five years, what is its current duration?
Answer to relevant QuestionsCarter National Bank holds $15 million in government bonds having a duration of 12 years. If interest rates suddenly rise from 6 percent to 7 percent, what percentage change should occur in the bonds’ market price?Suppose market interest rates were expected to rise. What type of option would normally be used?Explain what is involved in a put option.What kind of futures or options hedges would be called for in the following situations?a. Market interest rates are expected to increase and your financial firm’s asset-liability managers expect to liquidate a portion of ...You hedged your financial firm’s exposure to increasing interest rates by buying one December put on Eurodollar deposit futures at the premium quoted earlier on April 15 (see Exhibit 8-4).a. How much did you pay for the ...
Post your question