Question
a. What is the percentage change in the price of each bond if its yield to maturity falls from 44% to 33%? b. Which of
a. What is the percentage change in the price of each bond if its yield to maturity falls from 44% to 33%?
b. Which of the bonds A?D is most sensitive to a 1% drop in interest rates from 44% to 33% and why? Which bond is least sensitive?
Assume annual compounding.
Bond ABCD Coupon Rate (annual payments) 0% 0% 2% 8% Maturity (years) 7212
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a For zero coupon bonds Duration is same as tenure Duration for bond A 17 years ...
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Fundamentals of Corporate Finance
Authors: Berk, DeMarzo, Harford
2nd edition
132148234, 978-0132148238
