Question
You are considering the following two bonds. Both bonds are trading at a YTM of 18%: Long-High: Maturity 8 years, 15% coupon payable semi-annually, FV
You are considering the following two bonds. Both bonds are trading at a YTM of 18%:
Long-High: Maturity 8 years, 15% coupon payable semi-annually, FV $1000
Short-Lo: Maturity 5 years, 1% coupon payable semi-annually, FV $1000
A. Calculate the interest rate risk of each bond.
Long-High:
Price 1 =
Price 2 =
Interest rate risk =
Short-Lo
Price 1 =
Price 2 =
Interest rate risk =
B. Calculate the duration of each bond. (Show work)
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An Introduction To Derivatives And Risk Management
Authors: Don M. Chance, Roberts Brooks
7th Edition
0324321392, 9780324321395
