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A 9%, 16-year annual pay bond has a yield to maturity of 11% and Macaulay duration of 9.25 years. If the market yield declines
A 9%, 16-year annual pay bond has a yield to maturity of 11% and Macaulay duration of 9.25 years. If the market yield declines by 32 basis points, answer the following question: Will the price of the bond go up or down, given the change in rates? Why is the duration of the bond much lower than the maturity of the bond?
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Answer Given that the market yield declines by 32 basis points we can expect the price of the bond to go up This is because when market yields decreas...
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Investment Analysis and Portfolio Management
Authors: Frank K. Reilly, Keith C. Brown
10th Edition
538482109, 1133711774, 538482389, 9780538482103, 9781133711773, 978-0538482387
