Consider a semi-annual 5-year bond to maturity, pay a coupon of 5%, and be marketed at a
Question:
Consider a semi-annual 5-year bond to maturity, pay a coupon of 5%, and be marketed at a reasonable price with a return of 6%. assume par value = 1,000
Calculate the following
a. Percentage change in price as a result of a 1% increase in ytm
b. Percentage change in price due to a decrease of 1% in ytm
c. Redo parts a and b; above; given that the bond has a convexity of 5
d. What can you conclude from the above calculations?
Consider a semi-annual 3-year bond to maturity, pay a coupon of 0%, and be marketed at a reasonable price with a return of 5%.
a.what is the price of the bond as a result of a 1% increase in ytm.
b. repeat the question above, if the bond has a convexity of 5.
Financial Reporting Financial Statement Analysis and Valuation a strategic perspective
ISBN: 978-1285190907
8th edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw