Question
Common elements for each bond: Coupon: 7.5%, semi-annual coupon payments, YTM = 9% Bond A: Time to maturity: 5 years Bond B: Time to maturity:
Common elements for each bond: Coupon: 7.5%, semi-annual coupon payments, YTM = 9%
Bond A: Time to maturity: 5 years
Bond B: Time to maturity: 15 years
Consider these two bonds. Compute the interest rate sensitivity of each bond. Which bond has the lower sensitivity to changes in interest rates? For which bond is the rate of change in duration nonlinear? Explain briefly.
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Fundamentals of Corporate Finance
Authors: Stephen M. Ross, Randolph W Westerfield, Robert R. Dockson, Bradford D Jordan
12th edition
007353062X, 73530628, 1260153592, 1260153590, 978-1260153590
