Question
1. Application of duration (20 points) Draw the price-ytm( i ) graph for a 5% fixed-coupon bond that has 10 years to maturity (assuming annual
1. Application of duration (20 points)
Draw the price-ytm(i) graph for a 5% fixed-coupon bond that has 10 years to maturity (assuming annual coupon payments).
Calculate the duration for this bond if the interest rate is 3%.
What is the approximate percentage change in price if the interest rate rises to 5%? (calculate the price change using the duration approach)
What is the actual percentage change in price if the interest rate rises to 5%?
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The Structured Credit Handbook
Authors: Arvind Rajan, Glen McDermott, Ratul Roy
1st Edition
0471747491, 978-0471747499
