Question: Please do calculations in EXCEL Consider the following two bonds: Bond A Term to maturity: 30 years from today Face value: $1,000 Annual Coupon rate:

Please do calculations in EXCEL

Consider the following two bonds:

Bond A

Term to maturity: 30 years from today

Face value: $1,000

Annual Coupon rate: 6%

Number of payments per year: 2

Current YTM is 8%

Bond B

Term to maturity: 20 years from today

Face value: $1,000

Annual Coupon rate: 8.5%

Number of payments per year: 2

Current YTM is 8%

  • The bond price is simply the present value of the bonds cash flows. Compute the price for each bond.
  • Then make a table comparing the bond A and bond B prices if the YTM varies from 1%, 2%, 3% 17% but every other component of the bonds is held equal.
  • Compute duration and modified duration for each bond.
  • Which bond has the lower interest rate risk? Why?

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