Question
1.The Bank of Ghana issued a 3-year bond with a semi-annual coupon of 15.65%. The BIVABank purchased $40 million of the bonds whenthe current yield
1.The Bank of Ghana issued a 3-year bond with a semi-annual coupon of 15.65%. The BIVABank purchased $40 million of the bonds whenthe current yield of the bond was15% on the market.
a). Calculate the duration of the bond.[20marks]
b). An analyst with The BIVABank forecasts that the interest rate will rise by 0.5% next month. What is the percentage change in the price of the bond? [6marks]
c). What is the dollar change in the price of the bond? Calculate the new price of the bond on the market.[6marks]
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
International Financial Management
Authors: Cheol S. Eun, Bruce G.Resnick
6th Edition
71316973, 978-0071316972, 78034655, 978-0078034657
