Question
Bond 1 is a 5-year annual bond with a face value of $1,000, a coupon rate of 8%, and a yield to maturity of 7%.
Bond 1 is a 5-year annual bond with a face value of $1,000, a coupon rate of 8%, and a yield to maturity of 7%. Bond 2 is a 20-year zero-coupon bond with a face value of $1,000 and an annually compounded yield to maturity of 4%.
4. (1 point) What is the price of Bond 1? 5. (2 points) What is the price value of a basis point of Bond 1? 6. (1 point) What is the modified duration (MD) of Bond 1? 7. (1 point) What is the Macaulay duration, D_mac, of Bond 1?
8. (1 point) Suppose you form a portfolio using Bond 1 and Bond 2. How many contracts of Bond 2 are necessary to hedge this portfolio from interest rate risk (immunize the portfolio)?
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Technical Analysis Of Stock Trends
Authors: Robert D. Edwards, John Magee, W.H.C. Bassetti
8th Edition
0814406807, 978-0814406809
