In: Finance
you own a 15 - year 100 par bond. The coupon rate is an annual 9% payable annually. The price of the bond is 95.50
D. Calculate the approximate change in price of the bond if the yield rate increas by 0.5% using First Order Macaulay Approximation
E. Calculate the approximate change in price of the bond if the yield rate increase by 0.5% using First Order Modified Approximation
F. Calculate the exact change in price of the bond
coupon rate = 0.09
par value , M = 100
coupon value , C = 0.09*100 = 9
Price of bond , P = 95.50
YTM = (C + (M - P )/n)/(0.4*M+0.6*P) = (9 + ((100 - 95.50 )/15))/((0.4*100)+(0.6*95.5))
YTM = 0.095580678 or 9.55806785 or 9.56%
this is an approximate value of YTM
by adjusting for the difference in price , we get exact YTM = 0.095775 or 9.5775% or 9.58%
For Part D
For Part E
PART F