The fixed income nature of bonds implies that the price of these securities is highly sensitive to interest rate changes. For the following bond – a three-year $1,000 bond with a 8% annual coupon with a market interest rate, or YTM of 3%, 1) calculate the duration for the bond and 2) assuming interest rates rise to 5%, what is the approximate impact to the bond price?

Answer rating: 100% (QA)

SOLUTION 1 To calculate the duration of the bond we can use the following formula Duration Present v... View the full answer