XYZ Corporation has issued bonds with a par value of $1,000, a coupon of 6%. The bonds

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Question:

XYZ Corporation has issued bonds with a par value of $1,000, a coupon of 6%. The bonds currently yield 7% and have exactly 2 years until maturity.

Please do the following:

Calculate the price of the bonds

Calculate the Macauley Duration of the Bonds

Calculate the Modified Duration of the Bond

Calculate the Convexity of the Bonds. (Assume that you know that the price of the bond is 97.2615 if yields move up 50 basis points and 99.0763 if the move down 50 basis points.). Please note that these prices are stated as prices (in percentages). When you calculate the bond price in #1 above, you will need to state it in similar terms or your calculation will be whack-a-doodle.

Estimate the price of the bonds if the yield moves up 100 basis points using all of the information provided and calculations from above.

(Show all working out and formulas used. Do not use excel)