# Question: As part of your answer to problem 2 you computed

As part of your answer to problem 2, you computed the price of the bond [column (4)]. This is the same as the PV of cash flows in column (4).

a. Recompute the price of a bond based on a 11 percent discount rate (market rate of interest).

b. What is the percentage change in the price of the bond as interest rates decline by 2 percent from 13 percent to 11 percent?

c. Approximate this same value by multiplying the duration computed in problem 2 times the change in interest rates (2 percent). The answer in part c should come reasonably close to the answer in part b. However, they will not be exactly the same.

a. Recompute the price of a bond based on a 11 percent discount rate (market rate of interest).

b. What is the percentage change in the price of the bond as interest rates decline by 2 percent from 13 percent to 11 percent?

c. Approximate this same value by multiplying the duration computed in problem 2 times the change in interest rates (2 percent). The answer in part c should come reasonably close to the answer in part b. However, they will not be exactly the same.

## Answer to relevant Questions

a. Compute the duration for the following data. Use a discount rate of 13 percent. b. Explain why the answer to part a is higher than the answer to problem 2. c. If in part a the discount rate were 10 percent instead of 13 ...Assume you buy a 20-year, $1,000 par value zero-coupon bond that provides a 10 percent yield. Almost immediately after you buy the bond, yields go down to 8 percent. a. What will be your gain on the investment? b. What will ...Suggest two types of strategies to reduce or neutralize the impact of currency fluctuations on portfolio returns. What are three different ways to invest in gold coins? How is the private equity market related to the stock market?Post your question