Question
Consider both bonds. Common elements for each bond: Coupon: 7.5%, semi-annual coupon payments, YTM = 9% Bond A: Time to maturity: 5 years Bond B:
Consider both bonds.
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
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.
Show any excel work.
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Handbook Of The Fundamentals Of Financial Decision Making
Authors: Leonard C MacLean, William T Ziemba
1st Edition
9814417343, 978-9814417341
