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Use the following information for questions 2 4: You are considering the purchase of a bond with the following features: Exactly 15 years to maturity
Use the following information for questions 2 4: You are considering the purchase of a bond with the following features: Exactly 15 years to maturity 6% coupon, paid semi-annually The current yield to maturity on the bond is 7.5% Par value = $100 2. (3 pts.) What is the current price of the bond? 3. (5 pts.) Suppose that, immediately after you purchase the bond, the yield on the bond increases to 8%. If you hold the bond for exactly 2 years and then sell it after you receive the fourth coupon payment, what is your annualized rate of return? 4. (3 pts.) What is the approximate modified duration of the bond if you use an annual yield change of 10 bps
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