Question
BBC has just issued a new annual coupon bond that has 5 years to maturity, a coupon rate of 9%, and trades at par at
BBC has just issued a new annual coupon bond that has 5 years to maturity, a coupon rate of 9%, 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
