Exam Continued on the next page... Bond Duration and Volatility (15 points possible). A) Calculate the duration and volatility of Security A and Security B. The cash flows for 3. total of Security A pays $160, while the cash flows for Security B pays $300, each period for a four years. The going interest rate for both securities is 12%. B) What is the difference in duration between both securities A and B? How would the price of each respond to a 1% change in Yield to Maturity? How sensitive is Security A vs. B to changes in the Interest Rate? What is the purpose of, or why do we calculate duration and volatility of bonds? In your own brief words please? Exam Continued on the next page... Bond Duration and Volatility (15 points possible). A) Calculate the duration and volatility of Security A and Security B. The cash flows for 3. total of Security A pays $160, while the cash flows for Security B pays $300, each period for a four years. The going interest rate for both securities is 12%. B) What is the difference in duration between both securities A and B? How would the price of each respond to a 1% change in Yield to Maturity? How sensitive is Security A vs. B to changes in the Interest Rate? What is the purpose of, or why do we calculate duration and volatility of bonds? In your own brief words please