Question
If the market interest rates decrease by .5% per year (i.e. YTM becomes 6.5%). Use duration formula to find how such interest rate change will
If the market interest rates decrease by .5% per year (i.e. YTM becomes 6.5%). Use duration formula to find how such interest rate change will affect the bond price?
- Find the new bond price using a financial calculator.
- Compare actual and duration predicted bond price changes.
- Which change is larger? What role does bond price convexity play here?
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Intermediate Financial Management
Authors: Brigham, Daves
10th Edition
978-1439051764, 1111783659, 9780324594690, 1439051763, 9781111783655, 324594690, 978-1111021573
