8. Consider the following two bonds: Bond A $1,000 Face value Maturity Coupon (paid annually) 10...
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8. Consider the following two bonds: Bond A $1,000 Face value Maturity Coupon (paid annually) 10 years 4% Bond B $1,000 10 years 8% Assume both bonds has YTM of 8%. Compute the Macaulay Duration for both bonds? 9. Using the calculation of Macaulay duration obtained for both bonds A and B in question 8, what is the modified duration of bond A and B? 10. Consider the case of Bond A and B in question 8. What would happen to the price of bond A and B if its yield to maturity suddenly fell by 50 basis points, In Bond B, from 8% to 7.5% and Bond A from 4% to 3.5%. What is the predicted change in the bond price? 8. Consider the following two bonds: Bond A $1,000 Face value Maturity Coupon (paid annually) 10 years 4% Bond B $1,000 10 years 8% Assume both bonds has YTM of 8%. Compute the Macaulay Duration for both bonds? 9. Using the calculation of Macaulay duration obtained for both bonds A and B in question 8, what is the modified duration of bond A and B? 10. Consider the case of Bond A and B in question 8. What would happen to the price of bond A and B if its yield to maturity suddenly fell by 50 basis points, In Bond B, from 8% to 7.5% and Bond A from 4% to 3.5%. What is the predicted change in the bond price?
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8 Computation of Macaulays Duration Macaulays Duration Par value bond 1YTM2YTM111YTM2 2M Given YTM i... View the full answer
Related Book For
Auditing and Assurance services an integrated approach
ISBN: 978-0132575959
14th Edition
Authors: Alvin a. arens, Randal j. elder, Mark s. Beasley
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