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Investment Theory : You have purchased a bond with 4 years to maturity (face value $1,000), paying a coupon rate of 6.5% (paid annually), trading
Investment Theory :
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You have purchased a bond with 4 years to maturity (face value $1,000), paying a coupon rate of 6.5% (paid annually), trading at a yield to maturity of 7.4%.
A. What is the price of the bond? B. What is the bond's Macaulay duration? C. You expect that interest rates will fall by 0.3%. Use the modified duration to find the approximate percentage change in the price of the bond. D. What is the actual new price of the bond at its new yield-to-maturity? (using the regular present-value calculations) Why are your answers different? Explain and illustrate graphically.
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The Meaningful Money Handbook
Authors: Pete Matthew
1st Edition
0857196510, 978-0857196514
