Question
1- A 3-year, zero-coupon bond has a price of $1,000 and market rates are 8%. Assume rates fall by 1%. Using the duration formula, what
1- A 3-year, zero-coupon bond has a price of $1,000 and market rates are 8%. Assume rates fall by 1%. Using the duration formula, what would be the dollar change in the bond price?
2- Big Bank has $1000 in assets with a duration of 7 years and $900 of liabilities with a duration of 2 years. It also has equity capital of $100. What would be the bank's duration gap?
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Financial management theory and practice
Authors: Eugene F. Brigham and Michael C. Ehrhardt
13th edition
1439078106, 111197375X, 9781439078105, 9781111973759, 978-1439078099
