Question
(a) What is the duration of the coupon bond if the current yield-to-maturity (R) is 8 %? 10 %? 12 %? Coupon bond: Par value
(a) What is the duration of the coupon bond if the current yield-to-maturity (R) is 8 %? 10 %? 12 %?
Coupon bond: Par value = $1000 Coupon rate = 10% Annual payments
(b)How does the change in the current yield to maturity affect the duration of this coupon bond?
(c)Calculate the duration of the zero-coupon bond with a yield to maturity of 8 %, 10 % and 12%.
Zero-coupon bond: Par value = $1000 Coupon rate = 0%
(d)How does the change in the yield to maturity affect the duration of the zero-coupon bond?
(e)Why does the change in the yield to maturity affect the coupon bond differently to the way it affects the zero-coupon bond?
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