# Question: Consider the following two bonds which make semiannual coupon payments

Consider the following two bonds which make semiannual coupon payments: a 20 year bond with a 6% coupon and 20% yield, and a 30-year bond with a 6% coupon and a 20% yield.

a. For each bond, compute the price value of a basis point.

b. For each bond, compute Macaulay duration.

c. "For otherwise identical bonds, Macaulay duration is increasing in time to maturity." Is this statement always true? Discuss.

a. For each bond, compute the price value of a basis point.

b. For each bond, compute Macaulay duration.

c. "For otherwise identical bonds, Macaulay duration is increasing in time to maturity." Is this statement always true? Discuss.

**View Solution:**## Answer to relevant Questions

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 ...Suppose you observe the following 1-year implied forward rates: 0.050000 (1 year), 0.034061 (2-year), 0.036012 (3-year), 0.024092 (4-year), 0.001470 (5-year). For each maturity year compute the zero-coupon bond prices, ...Using the zero-coupon bond prices and oil forward prices in Table 8.9, what is the price of an 8-period swap for which two barrels of oil are delivered in even-numbered quarters and one barrel of oil in odd-numbered ...Using the information in Table 8.9, verify that it is possible to derive the 8-quarter dollar interest swap rate from the 8-quarter euro interest swap rate by using equation (8.13). A stock currently sells for $32.00. A 6-month call option with a strike of $35.00 has a premium of $2.27. Assuming a 4% continuously compounded risk-free rate and a 6% continuous dividend yield, what is the price of the ...Post your question