Consider a bond with annual coupon rate of 9% each year that is paid every six months,
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Question:
Consider a bond with annual coupon rate of 9% each year that is paid every six months, a remaining life of three years and a par value of US$1,000. The required yield to maturity on this bond is 11% each year.
a. Calculate the bond’s duration.
b. Now suppose the required yield increases to 11.5%. Calculate the new value of the bond and the percentage change in bond’s price.
Expert Answer:
a To calculate the bonds duration we first need to calculate the present value of each cash flow cou... View the full answer
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