A bond with 3 years to maturity and a coupon of 6.25% is currently selling at $932.24.

Question:

A bond with 3 years to maturity and a coupon of 6.25% is currently selling at $932.24. Assume annual coupon payments.

a. What is its yield to maturity?

b. Compute its duration using Equation 5.7 and the YTM calculated above at the discount rate.

c. If interest rates are expected to decrease by 50 basis points, what is the expected dollar change in price? Percentage change in price?

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... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...

Fantastic news! We've Found the answer you've been seeking!