You have a large position in two bonds with similar credit risk (i.e., ignore credit risk). Bond
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Question:
You have a large position in two bonds with similar credit risk (i.e., ignore credit risk). Bond A is priced at par yielding 6% with 20 years to maturity. Bond B has 20 years to maturity, coupon rate of 7% and yield of 6%. Assume a face value of 100 for both bonds and annual compounding.
a) Without making detailed calculations, can you guess which bond has a higher duration?
b) Now calculate the durations of these bonds using excel. Were you right?
Related Book For
Business Communication
ISBN: 978-1439080153
8th edition
Authors: Buddy Krizan, Patricia Merrier, Joyce P. Logan, Karen Schneiter Williams
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