Question
Suppose that the market price of a bond, which pays coupon semiannually, is currently 900. Suppose that this pricing corresponds to the (promised) yield to
Suppose that the market price of a bond, which pays coupon semiannually, is currently 900. Suppose that this pricing corresponds to the (promised) yield to maturity (YTM) of 10%.
The calculated Macaulay duration of this bond is 8. Estimate the approximate price change of this bond (in % terms) and find the approximate price (in euros) for this bond if the bond's (promised) YTM will decline by 75 basis points (i.e. from current 10% to 9.25%) as a result of general interest rate fall in the market.
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Foundations Of Financial Markets And Institutions
Authors: Frank J Fabozzi, Franco G Modigliani, Frank J Jones
4th Edition
0136135315, 978-0136135319
