Question 2, 4 & 6

(2) The current price of a bond having annual coupons is $1,312. The deriva- tive of the price function of the bond with respect to the yield to maturity is $7,443.81 when evaluated at the current annual yield, which is 7%. Calcu late the Macaulay duration D(07, oo) and the modified duration D(.07, 1) of the bond. A zero-coupon bond matures in eight years. It is sold to yield 5% annual! Find the modified duration D(.05, 1) Section 9.6 Problems, Chapter 9 429 (4) The current price of a noncallable bond with annual coupons is $1,120.58, ases to 4.4%. About what and the current annual yield is 4.25%. The modified duration D(0425.2) is 3.58. Es would the price be if the discount rate decreases to an annual effective rate of 37%? timate the price of the bond if the yield incre (5) Calculate the Macaulay duration D(.05, oo) and the modified duration D(05,2) of a preferred stock that pays dividends forever of $50 each six months, with the next dividend in exactly six months. (6) Calculate the Macaulay duration D(06, 00) and the modified duration D(06, 1) of a stock that pays annual dividends forever, assuming that the first dividend, payable in exactly one year, is $100 and then, each subsequent di dend is 2% more than the previous one to nay annual level (2) The current price of a bond having annual coupons is $1,312. The deriva- tive of the price function of the bond with respect to the yield to maturity is $7,443.81 when evaluated at the current annual yield, which is 7%. Calcu late the Macaulay duration D(07, oo) and the modified duration D(.07, 1) of the bond. A zero-coupon bond matures in eight years. It is sold to yield 5% annual! Find the modified duration D(.05, 1) Section 9.6 Problems, Chapter 9 429 (4) The current price of a noncallable bond with annual coupons is $1,120.58, ases to 4.4%. About what and the current annual yield is 4.25%. The modified duration D(0425.2) is 3.58. Es would the price be if the discount rate decreases to an annual effective rate of 37%? timate the price of the bond if the yield incre (5) Calculate the Macaulay duration D(.05, oo) and the modified duration D(05,2) of a preferred stock that pays dividends forever of $50 each six months, with the next dividend in exactly six months. (6) Calculate the Macaulay duration D(06, 00) and the modified duration D(06, 1) of a stock that pays annual dividends forever, assuming that the first dividend, payable in exactly one year, is $100 and then, each subsequent di dend is 2% more than the previous one to nay annual level