Question
1. Consider a 30-year corporate bond paying 9 percent semi-annual coupon. The current yield to maturity is 11 percent. ( 14 points ) a.Find the
1.Consider a 30-year corporate bond paying 9 percent semi-annual coupon. The current yield to maturity is 11 percent. (14 points)
a.Find the modified duration. Make sure to show your work.
b.Refer to part a. If the interest changes by 25 basis points, what is the exact change in price? Make sure to show your work.
c.Refer to part b. If the interest changes by 25 basis points, what is the approximate change in price? Make sure to show your work.
2. Consider a 30-year corporate bond paying 8 percent semi-annual coupon. The current yield to maturity is 10 percent. Find the approximate bonds modified duration by using changes in the interest rate up and down by 5 basis points.
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Finance Applications and Theory
Authors: Marcia Cornett
4th edition
1259691411, 978-1259691416
