A US treasury bond, issued on 11/15/2016, will expire on 11/15/2026. As of 2/1/2017, this bond is
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Question:
A US treasury bond, issued on 11/15/2016, will expire on 11/15/2026. As of 2/1/2017, this bond is yielding 2.84% and is trading at a clean (or flat) price of 95.00
1. What is the coupon of this bond? Assume semi-annual coupon payments are made to the bondholder.
2. Compute the effective duration of this bond
3. Suppose the 10-year bond yield immediately goes to 0.84% (this is the benchmark yield, assume the change was -2.00% from previous question). Estimate the change in value of the bond based on your effective duration calculation. Show your work.
4. Calculate the convexity of the bond.
Related Book For
Foundations of Financial Management
ISBN: 978-1259024979
10th Canadian edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
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