Question
Duration Part 1: Duration and Coupon Interest Consider a five-year $1,000 face value, Treasury bond with a 10 percent yield to maturity selling at par.
Duration
Part 1: Duration and Coupon Interest
Consider a five-year $1,000 face value, Treasury bond with a 10 percent yield to maturity selling at par.
Calculate the duration if the semiannual coupon is 7% (5 Points)
Calculate the duration if the semiannual coupon is 13% (5 Points)
Calculate the duration if the semiannual coupon is 16% (5 Points)
Plot the relationship between coupon interest rate (x-axis) and the duration (y-axis). Be sure to label the y-axis, x-axis, and chart title (5 Points)
In your report, identify and comment on the relationship between duration and coupon interest rate.
Part 2: Duration and Rate of Return
Consider a five-year $1,000 face value, Treasury bond with a 10 percent semiannual coupon selling at par.
Calculate the duration if the yield to maturity is 7% (5 Points)
Calculate the duration if the yield to maturity is 13% (5 Points)
Calculate the duration if the yield to maturity is 16% (5 Points)
Plot the relationship between yield to maturity (x-axis) and the duration (y-axis). Be sure to label the y-axis, x-axis, and chart title (5 Points)
In your report, identify and comment on the relationship between duration and yield to maturity.
Part 3: Duration and Maturity
Consider a $1,000 face value, Treasury bond with a 10 percent semiannual coupon selling at par with a 10 percent yield to maturity.
Calculate the duration if the maturity is in 6 years (5 Points)
Calculate the duration if the maturity is in 4 years (5 Points)
Calculate the duration if the maturity is in 2 years (5 Points)
Plot the relationship between maturity (x-axis) and the duration (y-axis). Be sure to label the y-axis, x-axis, and chart title (5 Points)
In your report, identify and comment on the relationship between duration and maturity.
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