DURATION EXAMPLE

Bank of Ghana recently issued a $3-$year bond with a semi$-$annual coupon of $15\mathrm{.}65\%.$ Suppose

ABC bank purchased $20$ million cedis of such bonds and the current yield of the bond is $16\mathrm{.}00\%$

on the market.

Calculate the duration of the bond

An analyst with ABC bank forecast that the interest rate will rise by $0\mathrm{.}5\%$ next month.

Estimate the percentage change in the price of the bond.

What is the cedi change in the price of the bond and hence calculate the new price of the

bond on the market.