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In: Finance
Problem 3-40 (LG 3-4, LG 3-6) MLK Bank has an asset portfolio that consists of $120...
Problem 3-40 (LG 3-4, LG 3-6)
MLK Bank has an asset portfolio that consists of $120 million of
15-year, 12 percent coupon, $1,000 bonds with annual coupon
payments that sell at par.
a-1. What will be the bonds’ new prices if market
yields change immediately by ± 0.10 percent?
a-2. What will be the new prices if market yields
change immediately by ± 2.00 percent?
b-1. The duration of these bonds is 7.6282 years.
What are the predicted bond prices in each of the four cases using
the duration rule?
b-2. What is the amount of error between the
duration prediction and the actual market values?
Solutions
jeff jeffy answered 2 years agoRelated Solutions
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