Question
a. Write down the formula used to calculate the Present Value (PV) of a future Cash Flow (CF) for n years. Using this formula, explain
a. Write down the formula used to calculate the Present Value (PV) of a future Cash Flow (CF)
for n years. Using this formula, explain why the price of a coupon bond and the yield to maturity are negatively related.
b. If there is an increase in interest rates, which would you rather be holding, long-term bonds or short-term bonds? Why? Which type of bond has the greater interest-rate risk?
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Derivatives And Internal Models
Authors: Hans Peter Deutsch, Mark W. Beinker
5th Edition
3030229017, 9783030229016
