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Question 07 a) Consider a 20 year 7.20% annual coupon bond whose duration is approx. 11 years when required rate of return (yield to maturity)
Question 07
a) Consider a 20 year 7.20% annual coupon bond whose duration is approx. 11 years when required rate of return (yield to maturity) is 7.50%. Prove that this bond is immunized if you hold it for 11 years.
b) Consider a 10 year 6.50% annual coupon bond whose duration is 7.50 years when required rate of return (yield to maturity) is 6.50%. Prove that this bond is immunized if you hold it for 7.50 years.
Note: A sincere and complete answer would be rated positive. Do not use Ms Excel please. Thank you
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