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You are considering a bond with two years to maturity paying 10% coupon ($50 coupon semiannually). The bond will pay four more CFs by maturity
You are considering a bond with two years to maturity paying 10% coupon ($50 coupon semiannually). The bond will pay four more CFs by maturity date.
Assume the yield to maturity of this bond is 8%.
a) Use the average time method to calculate the Modified Duration. May use Excel.
b) based on the answer you got from (a), if yield to maturity drop by .2% (not 2%, but point 2%), how much would the price change by in percent. Please specify price up or down.
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