1. What is the duration of a 12-year, 7.7% semi-annual bond if the market rate on bonds...
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Question:
1. What is the duration of a 12-year, 7.7% semi-annual bond if the market rate on bonds of similar quality is 7.5%?
2. Now suppose that the YTM has changed to 7.53%%. Using Macaulay duration (which is practically the same as using modified duration since you need to divide by (1+y)), what is the approximate percent change in the price of the bond? (You do not need to recalculate Macaulay duration using 7.53%. Use the duration value that you found in Problem 1.)
3. Now include convexity to estimate the percent change in the price of the bond.
Related Book For
Fundamentals of Corporate Finance
ISBN: 978-1260153590
12th edition
Authors: Stephen M. Ross, Randolph W Westerfield, Robert R. Dockson, Bradford D Jordan
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