Question
Someone promises to pay you $1,000 in years 5, 10 and 15 for a total of $3,000. Assume your required return is 8%. a. what
Someone promises to pay you $1,000 in years 5, 10 and 15 for a total of $3,000. Assume your required return is 8%.
a. what is the duration of this promise to pay you $3,000 over 15 years?
b. what's the convexity?
c. using the duration estimate alone, what is the estimated percentage price change in t=0 value if rates are expected to increase 2%?
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Income Tax Fundamentals 2013
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
31st Edition
1111972516, 978-1285586618, 1285586611, 978-1285613109, 978-1111972516
