Calculate the duration for a $1000, 4-year bond with a 4.5% annual coupon, currently selling at par.
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Calculate the duration for a $1000, 4-year bond with a 4.5% annual coupon, currently selling at par. Use duration to estimate the percentage change in the bond’s price for a decrease in the market rate to 3.5%. How different is your answer from the actual price change calculated using Equation 5.6?
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Period 1 Cash Flow 2 PV at 45 3 13 PV at 35 1 45 4306 4306 4347 2 45 4121 8242 4201 3 45 39...View the full answer
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Related Book For
Financial Institutions, Markets and Money
ISBN: 978-1119330363
12th edition
Authors: David S. Kidwell, David W. Blackwell, David A. Whidbee, Richard W. Sias
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