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Consider a debt instrument with a payoff at time 3 equal to 2.5r3. a) What is the price of this payoff at time 0? b)
Consider a debt instrument with a payoff at time 3 equal to 2.5r3. a) What is the price of this payoff at time 0? b) What is the dollar duration of this payoff? c) What is the duration of this payoff?
| Bond price | Zero price | |||||||
| Coupon | Maturity | per $100 par | Bond yield | per $1 par | Zero rate | |||
| 2.000% | 0.5 | 100.0000 | 2.000% | 0.9901 | 2.000% | |||
| 3.000% | 1.0 | 100.4944 | 2.496% | 0.9755 | 2.500% | |||
| 4.000% | 1.5 | 101.4755 | 2.987% | 0.9563 | 3.000% | |||
| 5.000% | 2.0 | 102.9329 | 3.469% | 0.9330 | 3.500% | |||
| 6.000% | 2.5 | 104.8548 | 3.942% | 0.9057 | 4.000% | |||
| 6.000% | 3.0 | 105.0731 | 4.183% | 0.8815 | 4.250% |
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