Question
BBC has just issued a new annual coupon bond that has 5 years to maturity, a coupon rate of 5% and trades at par at
BBC has just issued a new annual coupon bond that has 5 years to maturity, a coupon rate of 5% and trades at par at a price of $1000. You may assume that the yield-curve is flat.
a) Compute the duration of the BBC bond.
b) Estimate the dollar price change of the BBC bond using duration if interest rates increase by 0.5%.
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Financial Markets And Institutions An Introduction To Risk Management Approach
Authors: Anthony Saunders, Marcia Cornett
3rd Edition
0073250937, 9780073250939
