A$100 000 bond has 3 years to maturity, and 8% p.a. coupon rate (paid annually). The current

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A$100 000 bond has 3 years to maturity, and 8% p.a. coupon rate (paid annually). The current yield rate is 10%.

Required:

a) What is the duration of this bond?

b) What is the price of this bond?

c) If the current yield is decreased by 100 basis points,

1) What is the percentage change in bond price using the duration approach?

2) What is the price of this bond with this new yield rate?

Related Book For answer-question

Essentials Of Corporate Finance

ISBN: 9780073405131

6th Edition

Authors: Stephen A. Ross, Randolph Westerfield, Bradford D. Jordan

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Posted Date: Feb 14, 2023 11:40 PM

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A$100 000 bond has 3 years to maturity, and 8% p.a. coupon rate (paid annually). The current

Question:

Expert Answer:

a The duration of the bond can be calculated using the formula Duration 1 yn x t x 1 yn 1 yn x 1 yn ... View the full answer

Essentials Of Corporate Finance

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