Find the Macaulay duration and the modified duration of a 20-year, 10% corporate bond priced to yield 8%. According to the modified duration of this bond, how much of a price change would this bond incur if market yields rose to 9%? Using annual compounding, calculate the price of this bond in one year if rates do rise to 9%. How does this price change compare to that predicted by the modified duration? Explain the difference.
Answer to relevant QuestionsWhich one of the following bonds would you select if you thought market interest rates were going to fall by 50 basis points over the next 6 months? a. A bond with a Macaulay duration of 8.46 years that’s currently being ...A $1,000 par value bond has a current price of $800 and a maturity value of $1,000 and matures in 5 years. If interest is paid semiannually and the bond is priced to yield 8%, what is the bond’s annual coupon rate? Using the resources at your campus or public library (or on the Internet), select 5 mutual funds—a growth fund, an equity-income fund, an international (stock) fund, an index fund, and a high-yield corporate bond ...Briefly describe some of the investor services provided by mutual funds. What are automatic reinvestment plans, and how do they differ from automatic investment plans? Describe a back-end load, a low load, and a hidden load. How can you tell what kinds of fees and charges a fund has?
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