Compute the Macaulay duration under the following conditions: a. A bond with a four-year term to maturity,
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a. A bond with a four-year term to maturity, a 10 percent coupon (annual payments), and a market yield of 8 percent.
b. A bond with a four-year term to maturity, a 10 percent coupon (annual payments), and a market yield of 12 percent.
c. Compare your answers to Parts a and b. Assuming it was an immediate shift in yields, discuss the implications of this for classical immunization.
Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a...
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Investment Analysis and Portfolio Management
ISBN: 978-0538482387
10th Edition
Authors: Frank K. Reilly, Keith C. Brown
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