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Calculate and complete the tables for the following 3 holding period scenarios ( 5 , 1 1 . 5 , and 2 7 years )
Calculate and complete the tables for the following holding period scenarios and years assuming any coupons are invested at the new yield ie the basis point increase and the bond is sold at this new yield. Further assume semiannual compounding for the reinvestment of any cash flows.
a Quantify the price and reinvestment risks for the holder of the bond for this increase in rates.
b Quantify the net risk for the increasing rate scenario.
c Find the holding period returns under the scenario of an immediate interest rates increase from to
Price and Reinvestment
Bond: CouponCompounded Semiannually
$ FACE Value
Yield
years until maturity
Price $
Duration
Convexity
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