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This is the end of 2022 and you hold a bond maturing at the end of 2027 with a coupon of $50, paid at the end of each year. Noe that on it is a 5-year bond, 2023, 2024, 2025, 2026, and 2027. The face value of the bond is $1,000. The current yield to maturity of the bond is 4%. a. What is the duration of the bond? b. Suppose that the yield on the bond increased (at the beginning of 2020) from 4% to 4.1%. By what percentage would the price of the bond likely to decline? This is the end of 2022 and you hold a bond maturing at the end of 2027 with a coupon of $50, paid at the end of each year. Noe that on it is a 5-year bond, 2023, 2024, 2025, 2026, and 2027. The face value of the bond is $1,000. The current yield to maturity of the bond is 4%. a. What is the duration of the bond? b. Suppose that the yield on the bond increased (at the beginning of 2020) from 4% to 4.1%. By what percentage would the price of the bond likely to decline?
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Answer rating: 100% (QA)
a The duration of a bond is a measure of the bonds sensitivity to changes in interest rates It takes ... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-0324659139
11th edition
Authors: Loren A. Nikolai, John D. Bazley, Jefferson P. Jones
Posted Date:
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