Two bonds are available for purchase in the financial markets The first bond is a two year, $1,000 bond that pays an annual coupon of 10 percent The second bond is a two year, $1,000, zero coupon bond a What is the duration of the coupon bond if the current yield to maturity (R) is 8 percent 10 per...

a b Increasing the yield to maturity decreases the duration of the bond c Calculate the durati ...

Two bonds are available for purchase in the financial markets. The first bond is a two-year, $1,000

Question:

Two bonds are available for purchase in the financial markets. The first bond is a two-year, $1,000 bond that pays an annual of 10 percent. The second bond is a two-year, $1,000, zero-coupon bond.
a. What is the duration of the bond if the current yield-to-maturity (R) is 8 percent?10 percent? 12 percent?
b. How does the change in the yield to affect the duration of this bond?
c. Calculate the duration of the zero-coupon bond with a yield to of 8 percent, 10 percent, and 12 percent.
d. How does the change in the yield to affect the duration of the zero-coupon bond?
e. Why does the change in the yield to affect the bond differently than it affects the zero-coupon bond? Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...