Question
Consider the following bonds: Bond A Bond B Bond C Par Coupon rate YTM Time to maturity $1,000 3% 3% 3years $1,000 6% 8% 4
Consider the following bonds:
|
| Bond A | Bond B | Bond C |
|
Par Coupon rate YTM Time to maturity |
$1,000 3% 3% 3years
|
$1,000 6% 8% 4 years
|
$1,000 0% 10% 10 years |
a. Calculate the duration for each bond, by hand (10 points). Based on its duration, which bond has the highest level of interest rate risk? YOU MUST CALCULATE ONE BOND PRICE USING THE BOND PRICING FORMULA!
b. Calculate the duration of a portfolio containing these 3 bonds in equal weights.
c. Assume interest rates increase by one percentage point. Using the portfolios duration, approximately how much will this portfolio change in value?
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Fundamentals Of Healthcare Finance
Authors: Paula H. Song, Kristin L. Reiter
4th Edition
1640553223, 978-1640553224
