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Consider the following. a. What is the duration of a two-year bond that pays an annual...

Consider the following.

a. What is the duration of a two-year bond that pays an annual coupon of 9 percent and whose current yield to maturity is 14 percent? Use $1,000 as the face value. (Do not round intermediate calculations. Round your answer to 3 decimal places. (e.g., 32.161))
b. What is the expected change in the price of the bond if interest rates are expected to decrease by 0.2 percent? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))

a. duration of bond

b. expected change in the price

Solutions

Expert Solution

NO EXCEL FUNCTION IS USED. SIMPLE CALCULATIONS. EXPECTED CHANGE IN PRICE IS CALCULATED USING DURATION APPROXIMATION FORMULA AS SUM IS BASED ON DURATION

jeff jeffy answered 5 hours ago
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