Suppose that there's a 7% 5-year coupon (paid annually) bond with F = $1000 and yield to
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Question:
Suppose that there's a 7% 5-year coupon (paid annually) bond with F = $1000 and yield to maturity 7.5%.
a. What is the bond's modified duration?
b. What is the percent change in value of this bond using duration only if rates change +/- 2
percentage points?
c. How do these calculations compare to the actual percent price changes?
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