Question
Now, find one more 5-year bond that has the same feature as one of your 30-years bond, ie, same rating and same coupon rate. Note:
Now, find one more 5-year bond that has the same feature as one of your 30-years bond, ie, same rating and same coupon rate. Note: You could use any bond with longer vs. shorter bond as well instead of 5 vs. 10 years. The coupon rate might not be the same but choose bonds with same rating and very close numbers in terms of coupon rate. Calculate the new price of bond at the new YTM of 2%, 4%, 6%, 8%, and 10% for both 5-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 (%) Coupon Payment = Coupon Rate %*1,000 | Maturity (N) | YTM (%I/Y) | $ Price = % quoted price *1,000 |
Shorter Maturity Bond | Obtain from Website of Your Choice | Obtain from Website | Obtain from Website | Obtain from Website |
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Longer Maturity Bond | Obtain from Website of Your Choice | Obtain from Website | Obtain from Website | Obtain from Website |
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| Price@2% | Price@4% | Price@6% | Price@8% | Price@10% |
5-year bond (Shorter Bond)
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30-year bond (Longer Bond)
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To calculate the bond prices at the new YTM for shorter bond and longer bond place the value in the table
___________ PMT, 1,000 FV, 2% I/Y, ____5_____ N, CPT PV___________
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