You have a 5-year $1000 bond with yield-to-maturity of 10% and a coupon rate of10%.
a. What is the duration of this bond? (Assume annual coupon payments and compounding.)
b. If the interest rate increases by 50 basis points (1/2 percent) to 10.5%, by how much will the price of the bond change based on duration rule?
c. Assume the coupon rate for the bond in part (a) is 20% rather than 10%, what is the duration of the bond now? If the interest rate increases by 50 basis points, by how much will the price of the bond change based on duration rule? d. If the term to maturity for the bond in part.

(a) Is 10 years instead of 5 years, what is the duration of the bond? If the interest rate increases by 50 basis points, by how much will the price of the bond change based on duration rule? If the yield-to-maturity for the bond in part (a) is 15% instead of 10%, What is the duration of the bond? If the interest rate increases by 50 basis points, by how much will the price of the bond change based on duration rule?

Answer rating: 100% (QA)

a The duration of the bond is 576 years This is calculated by dividing the present v... View the full answer