Bank Alpha has an inventory of AAA-rated, 15-year zero-coupon bonds with a face value of $400 million.

Question:

Bank Alpha has an inventory of AAA-rated, 15-year zero-coupon bonds with a of $400 million. The bonds currently are yielding 9.5 percent in the over-the-counter market.
a. What is the modified duration of these bonds?
b. What is the price volatility if the potential adverse move in yields is 25 basis points?
c. What is the DEAR?
d. If the price volatility is based on a 99 percent confidence limit and a mean historical change in daily yields of 0.0 percent, what is the implied standard deviation of daily yield changes? Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...