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A coupon-paying bond pays interest semiannually. The Macaulay duration of the bond is 5.2 and its yield to maturity is 7%. Currently, the bond sells
A coupon-paying bond pays interest semiannually. The Macaulay duration of the bond is 5.2 and its yield to maturity is 7%. Currently, the bond sells for $955. If prevailing market interest rates for comparable debt are expected to increase immediately by 50 basis points (i.e., 0.5%), using the Modified Duration, what would be the estimated price of the bond following the expected change in interest rates?
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We can estimate the new price of the bond using the Modified Duration MDur approach 1 Given Informat...
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Financial Institutions Management A Risk Management Approach
Authors: Marcia Cornett, Patricia McGraw, Anthony Saunders
8th edition
978-0078034800, 78034809, 978-0071051590
