For the same bond , calculate the prices of the bond assuming 1) the yield to maturity
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Question:
- For the same bond , calculate the prices of the bond assuming 1) the yield to maturity of the bond goes up 0.01% (price here called P_1) and 2) the yield to maturity of the bond goes down 0.01% (price here called P_2)
- the duration of the bond by using the formula D = -(P_1 - P2)/P_0/dy, with P_1 and P_2 from step a. and P_0 the price from step 2 of Prob #1 above. Dy is the difference in yield when calculating P_1 an P_2
- Calculate the duration of the bond using the MDuration function in Excel and verify you get the same number as in step b
For the same bond in probl#1, assuming the new yield of the bond one year from today is 4%. Perform the following calculations: (5 points)
- Calculate the new price of the bond, using the Price function in Excel. (Ignore the fact one year later this bond is only a four year bond)
- Calculate the price return of the bond and the income of the bond (using original YTM)
- Calculate the 1 year total return of the bond
settlement | 11/19/2021 | Maturity | 11/19/2026 |
Yield to Maturity | Coupon | Principal | |
3.00% | 3.50% | $ 100 | |
Compounding Freq | 2.0 |
Related Book For
Fundamentals Of Corporate Finance
ISBN: 9780135811603
5th Edition
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford
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