You hold a bond with duration of 15. Its yield is 7% while the cash (one-year) rate is 3%. You expect yields to move down by 15 basis points over the year. Give a rough estimate of your expected return. What is the risk premium on this bond? 

Answer rating: 100% (QA)

To estimate the expected return and risk premium on the bond we need to consider the bonds duration ... View the full answer