One author says that duration is the weighted average life of a financial instrument. A different one says that duration is a measure of elasticity. Which of the authors is correct? Or, are they both correct?
Answer to relevant QuestionsSuppose that a zero coupon bond selling at $ 1,000 par has a duration of four years. If interest rates increase from 6 percent to 7 percent annually, the value of the bond will fall by what amount using Equation 6.14? Use ...You have just purchased a five- year maturity bond for $ 10,000 par value that pays $ 610 in coupon interest annually ($ 305 every six months). You expect to hold the bond until maturity. Calculate your expected total return ...If you invest $ 9,000 today at 8 percent compounded annually, but after three years the interest rate increases to 10 percent compounded semiannually, what is the investment worth seven years from today? Given the following information for AmBank, calculate its income statement (effective) GAP. How much will NII change if the prime rate rises 1 percent? The ECR reflects the relationship of each account’s rate to the prime ...List the basic steps in DGAP analysis. What is the importance of different interest rate forecasts?
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