An 8-year bond with 6% annual coupons and a 5.004% yield sells for $106.44 with a Macaulay

Question:

An 8-year bond with 6% annual coupons and a 5.004% yield sells for $106.44 with a Macaulay duration of 6.631864. A 9-year bond has 7% annual coupons with a 5.252% yield and sells for $112.29 with a Macaulay duration of 7.098302. You wish to duration-hedge the 8-year bond using a 9-year bond. Howmany 9-year bonds must we short for every 8-year bond?
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Derivatives Markets

ISBN: 9789332536746

3rd Edition

Authors: Robert McDonald

Question Posted: