Question
A 6-year 5% bond is selling to yield 6%. The bond pays interest semi-annually. Using the approximate formula What is the estimated bond price for
A 6-year 5% bond is selling to yield 6%. The bond pays interest semi-annually. Using the approximate formula
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What is the estimated bond price for 150 basis points decrease in the yield, using approximate duration formula to estimate the new price?
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What would explain the difference between the estimated bond price and the actual bond price you find using the financial calculator?
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How can you correct the mispricing? Please provide calculations for the correction.
Step by Step Solution
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Bond Price Estimation and Correction Given 6year bond with 5 coupon semiannual payments Current yield 6 semiannual New desired yield 45 semiannual 150 basis points decrease Need to estimate new price ...
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Investments Analysis and Management
Authors: Charles P. Jones
12th edition
978-1118475904, 1118475909, 1118363299, 978-1118363294
