An investor plans to buy bonds of the FSZ business. I f the nominal interest rate is
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Question:
An investor plans to buy bonds of the FSZ business. I
f the nominal interest rate is 4% and the maturity in 4 years, while the nominal value is 1,000, answer the following questions:
i. In case the current interest rate is set at 2%, how much does the investor have to pay to buy such a bond today?
ii. If the duration of this bond is equal to 3 years, calculate the change in its price if a) the interest rate in the market increases by 2% and b) decreases by 1%. Comment on the results.
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