Question
Consider a bond with annual coupon rate of 9% each year that is paid every six months, a remaining life of three years and a
Consider a bond with annual coupon rate of 9% each year that is paid every six months, a remaining life of three years and a par value of US$1,000. The required yield to maturity on this bond is 11% each year.
a. Calculate the bond’s duration.
b. Now suppose the required yield increases to 11.5%. Calculate the new value of the bond and the percentage change in bond’s price.
Step by Step Solution
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There are 3 Steps involved in it
Step: 1
a To calculate the bonds duration we first need to calculate the present value of each cash flow cou...
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Step: 2
Step: 3
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Fundamentals of Futures and Options Markets
Authors: John C. Hull
8th edition
978-1292155036, 1292155035, 132993341, 978-0132993340
