Question: A high-yield bond fund manager is considering adding a US$50 million face value, fiveyear, 6.75% semiannual coupon bond with a YTM of 5.40% to an

A high-yield bond fund manager is considering adding a US$50 million face value, fiveyear, 6.75% semiannual coupon bond with a YTM of 5.40% to an active portfolio. The manager uses regression analysis to estimate the bond’s empirical duration to be 2.95. Calculate the bond’s analytical duration, and estimate the difference in the expected versus actual market value change for this position, given a 50 bp decline in benchmark yields to maturity using these two measures.

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1 Solve for the bonds analytical duration by using the Excel MDURATION function MDURATIONsettlement ... View full answer

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