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A company issues a 5-year step-up note paying semi-annual coupons. The coupon rate starts at 2.70% and goes up by 30 bps every year. The
A company issues a 5-year step-up note paying semi-annual coupons. The coupon rate starts at 2.70% and goes up by 30 bps every year. The issue sells at $87 (par value is $100).
- (a)What is the YTM (BEY basis) of this note?(2 marks)
- (b)Use a 10 bps rate shock to estimate the duration and the convexity of the note.(3 marks)
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Practical Financial Management
Authors: William R. Lasher
8th edition
1305637542, 978-1305887237, 1305887239, 978-1305637542
