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On Jan 1, 2012, FIN307 is considering the newly issued 10-year AAA corporate bond, which is...

On Jan 1, 2012, FIN307 is considering the newly issued 10-year AAA corporate bond, which is due Jan 1, 2022, with a coupon rate of 6% per year paid every 6 months. The bond is traded at par. Suppose the market interest rate declines by 100 bps (i.e., 1%), what is the duration and modified duration (before interest rate change) and the effect of the market interest decline on the bond price?

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Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

jeff jeffy answered 1 year ago
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