Question
Given a 4-year, 5% coupon bond with 6% yield, and $100 par, answer the questions below (Assume annual compounding): Q1: What is the duration of
Given a 4-year, 5% coupon bond with 6% yield, and $100 par, answer the questions below (Assume annual compounding):
Q1: What is the duration of the bond?
Q2: What is the modified duration of the bond?
Q3: What is the convexity of the bond?
Q4: Suppose the bonds yield drops from 6% to 5.5%, what is the estimated percentage price change of the bond using both duration and convexity measures?
Q5: What is the actual estimated percentage price change of the bond?
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Applied Quantitative Finance
Authors: Härdle
3rd Edition
3662544857, 978-3662544853
