Using our same bond with a modified duration of 3.861, assume an instantaneous yield change of 20

Question:

Using our same bond with a modified duration of 3.861, assume an instantaneous yield change of 20 basis points ( 0.0020), from 10 percent to 10.20 percent. The approximate change in price based on Equation 18‐4 would be

P -3.861x (+0.0020) x 100 = -0.772%

Given that the original price of the bond is $1,000, this percentage price change would result in an estimated bond price of $992.28. For very small changes in yield, Equation 18‐4 produces a good approximation.

Equation 18‐4

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Investments Analysis And Management

ISBN: 9781118975589

13th Edition

Authors: Charles P. Jones, Gerald R. Jensen

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Question Posted: Dec 28, 2023 12:20 PM

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Using our same bond with a modified duration of 3.861, assume an instantaneous yield change of 20

Question:

ΔΡ P -3.861x (+0.0020) x 100 = -0.772%

Step by Step Answer:

Investments Analysis And Management

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