Question
Consider a bond A priced at 100 with maturity T and annual coupon C, and a perpetual bond B prices at 100 paying the same
Consider a bond A priced at 100 with maturity T and annual coupon C, and a perpetual bond B prices at 100 paying the same annual coupon C indefinitely.
What is the yield of each bond? What is the Macaulay duration of each bond? Which bond is riskier in terms of sensitivity to changes in yield?
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The Handbook Of Post Crisis Financial Modelling
Authors: Emmanuel Haven, Philip Molyneux, John Wilson, Sergei Fedotov, Meryem Duygun
1st Edition
1137494484, 978-1137494481
