Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

help are my answers correct?? also need help on graphing them if they are A 20 year bond that has the same feature as one

help are my answers correct?? also need help on graphing them if they are

A 20 year bond that has the same feature as one of your 30 years bonds ie, same rating and same coupon rate of 3.5% . Calculate the new price of bond at the new YTM of 2%,4%, 8%, and 10% for both 20 -years bond and 30-years bond. Plot the graph of the relationship between the price and YTM for each bond on the same graph. What did you find regarding the relationship between price and YTM for shorter and longer maturity bond? Which bond has a higher sensitive to the change in the price when the yield change?

Bond Rating Coupon Rate (%) Maturity (N) YTM (%I/Y) $ Price = % quoted price *1,000
Coupon Payment = Coupon Rate %*1,000
Shorter Maturity Bond AAA johnson (30 year) 3.5 25 3.292 $1,035.30
Longer Maturity Bond AAA microsoft (20 year bond) 3.5 17 2.973 $1,069.90
Price@2% Price@4% Price@6% Price@8% Price@10%
30-year bond $1,293.97 $921.44 $678.38 $516.65 $406.68
20-year bond $1,215.27 $938.75 $735.85 $585.75 $473.73

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Public Relations Handbook

Authors: Alison Theaker

6th Edition

0367278901,1000208834

More Books

Students also viewed these Finance questions