2. A bond with $1,000 face value, 6% coupon, market interest rates of %7, and three...

2. A bond with $1,000 face value, 6% coupon, market interest rates of %7, and three years to maturity.

a. Calculate the duration of the bond

b. Assume that market interest rates increased to 10%, re-calculate the duration of the bond

c. Assume that the market interest rates increased to 15%, re-calculate the duration of the bond

d. Comment generally on the relationships between the interest rates, coupons, and duration

Expert Solution

Rahul Sunny answered 2 years ago

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