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Problem: One 12 years maturity bond, with the following information: Par value: $1,000 Duration: 8 years Current price: $800 Current market Interest Rate: 6% Question:
Problem:
One 12 years maturity bond, with the following information:
- Par value: $1,000
- Duration: 8 years
- Current price: $800
- Current market Interest Rate: 6%
Question:
(a) By usingduration,what would be the predicted price change (in dollar amount) if the interest rate decreases to 5%?
(b) By usingduration,what would be the predicted price change (in dollar amount) if the interest rate increases to 8%?
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