Consider a coupon bond with semi-annual coupon rate 6%, M = 100, and n 20. Assume...
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Consider a coupon bond with semi-annual coupon rate 6%, M = 100, and n 20. Assume the semi-annual yield to maturity y = 6%. Let r' denote the reinvestment rate of the coupon payments. Let y' denote the interest rate at the time of sale. Also, assume your holding period to equal the Macaulay duration of the bond rounded to the closest integer. Calculate the total future dollars at the end of the holding period under the following two scenarios: A. Interest rates increase immediately after the purchase, r'= y' y + 100 basis points b. Interest rates decrease immediately after the purchase, r'= y'= y - 100 basis points Consider a coupon bond with semi-annual coupon rate 6%, M = 100, and n 20. Assume the semi-annual yield to maturity y = 6%. Let r' denote the reinvestment rate of the coupon payments. Let y' denote the interest rate at the time of sale. Also, assume your holding period to equal the Macaulay duration of the bond rounded to the closest integer. Calculate the total future dollars at the end of the holding period under the following two scenarios: A. Interest rates increase immediately after the purchase, r'= y' y + 100 basis points b. Interest rates decrease immediately after the purchase, r'= y'= y - 100 basis points
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Coupon rate 006 Coupon Amount 6 Price 100 Duration 20 a Yield006 ... View the full answer
Related Book For
Financial Markets And Institutions
ISBN: 978-0132136839
7th Edition
Authors: Frederic S. Mishkin, Stanley G. Eakins
Posted Date:
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