Question
Amy's portfolio consists of three bonds: a 10-year zero-coupon bond with a redemption value of $100,000, a 15-year coupon bond with Macaulay duration of 10.9994
Amy's portfolio consists of three bonds: a 10-year zero-coupon bond with a redemption value of $100,000, a 15-year coupon bond with Macaulay duration of 10.9994 and price of $33,114.06, and a 20-year par bond with the redemption of $50,000 and an annual coupon rate of 4.00%. All prices and durations were calculated assuming an annual yield of 4.25%. The first-order Macaulay approximation of the price of this portfolio, when the interest rate fell to i, is $150,710.00. Find the price of the portfolio at the original rate of i0 = 4.25% and the Macaulay's duration for each bond.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started