Find the Macaulay duration and the modified duration of a 20-year, 10% corporate bond priced to yield
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Find the Macaulay duration and the modified duration of a 20-year, 10% corporate bond priced to yield 8%. According to the modified duration of this bond, how much of a price change would this bond incur if market yields rose to 9%? Using annual compounding, calculate the price of this bond in one year if rates do rise to 9%. How does this price change compare to that predicted by the modified duration? Explain the difference.
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To calculate the duration of the bond first calculate the bonds current market price Bond terms 10 coupon 20 years 8 YTM Price N 20 I 8 PMT 100 FV 100...View the full answer
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Related Book For
Fundamentals of Investing
ISBN: 978-0133075359
12th edition
Authors: Scott B. Smart, Lawrence J. Gitman, Michael D. Joehnk
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