A 6-year 5% bond is selling to yield 6%. The bond pays interest semi-annually. Using the approximate
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A 6-year 5% bond is selling to yield 6%. The bond pays interest semi-annually. Using the approximate formula
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What is the estimated bond price for 150 basis points decrease in the yield, using approximate duration formula to estimate the new price?
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What would explain the difference between the estimated bond price and the actual bond price you find using the financial calculator?
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How can you correct the mispricing? Please provide calculations for the correction.
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