Question
Item 9 Item 9 10 points Consider a bond with a coupon of 7.4 percent, six years to maturity, and a current price of $1,029.90.
Item 9
Item 9 10 points
Consider a bond with a coupon of 7.4 percent, six years to maturity, and a current price of $1,029.90. Suppose the yield on the bond suddenly increases by 2 percent.
a. Use duration to estimate the new price of the bond. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
b. Calculate the new bond price using the usual bond pricing formula. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
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ISE Financial Institutions Management A Risk Management Approach
Authors: Anthony Saunders Professor, Marcia Millon Cornett, Otgo Erhemjamts
10th International Edition
1260571475, 9781260571479
