Question
Assume the following information about a Treasury bond: Coupon Rate: 7%; maturity: November 15, 2002; settlement date: September 13, 2000; last coupon paid: May 15,
Assume the following information about a Treasury bond: Coupon Rate: 7%; maturity: November 15, 2002; settlement date: September 13, 2000; last coupon paid: May 15, 2000; yield: 6.75%; nominal value: $100. Coupon frequency and compounding frequency are assumed to be semiannual.
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Compute the accrued interest, the (dirty) price, the clean price and the modified duration of this bond.
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Using the modified duration, what is the approximate percentage change in price for a 25 basis point change in yield?
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Find the price if the yield is 7%. Why is the total cost not equal to par? Find the price if the yield is 6.5%. Did the price change by more or less than was predicted? Why?
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