You ran a regression of the yield of TBR Companys 10-year bond on the 10-year U.S. Treasury
Question:
YieldTBR = 0.54 + 1.22 YieldTreasury
where YieldTBR is the yield on the TBR bond and YieldTreasury is the yield on the U.S. Treasury bond. The modified duration on the 10-year U.S. Treasury is 7.0 years, and modified duration on the TBR bond is 6.93 years.
a. Calculate the percentage change in the price of the 10-year U.S. Treasury, assuming a 50-basis-point change in the yield on the 10-year U.S. Treasury.
b. Calculate the percentage change in the price of the TBR bond, using the regression equation, assuming a 50-basis-point change in the yield on the 10-year U.S. Treasury.
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Related Book For
Investment Analysis and Portfolio Management
ISBN: 978-0538482387
10th Edition
Authors: Frank K. Reilly, Keith C. Brown
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