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Question 8 (12 marks) (a) Calculate the duration for a five-years, RM1,000 par value corporate bond purchased today at a yield to maturity of 8
Question 8 (12 marks) (a) Calculate the duration for a five-years, RM1,000 par value corporate bond purchased today at a yield to maturity of 8 percent. The bond's coupon rate is 10 percent per annum for the first three years of the bond maturity and change to 8 percent per annum for the remaining years until maturity. [Hint: Coupon payment is made in semi- annually.] (9 marks) (b) Calculate the modified durations of the bond and indicate how the price of the bond would change if interest rate decline by 90 basis points. (3 marks) Question 8 (12 marks) (a) Calculate the duration for a five-years, RM1,000 par value corporate bond purchased today at a yield to maturity of 8 percent. The bond's coupon rate is 10 percent per annum for the first three years of the bond maturity and change to 8 percent per annum for the remaining years until maturity. [Hint: Coupon payment is made in semi- annually.] (9 marks) (b) Calculate the modified durations of the bond and indicate how the price of the bond would change if interest rate decline by 90 basis points
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