Question
Question 8 A bond with a face value of $1000, coupon rate of 5% per annum with semi-annual coupons has a yield to maturity of
Question 8 A bond with a face value of $1000, coupon rate of 5% per annum with semi-annual coupons has a yield to maturity of 3%. It is issued on January 1, 2013 and maturity is on December 31, 2019.
(a) Calculate the modified duration of this bond. (5 marks)
(b) Using modified duration, calculate the expected new price of the bond if the yield rises by 10 basis points immediately after the issue. (5 marks)
ANSWER USING BOTH EXCEL AND MANUAL WORKINGS.
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Financial Management Core Concepts
Authors: Raymond Brooks
4th Edition
134730417, 134730410, 978-0134730417
