Question

In: Finance

Consider a 30-year U.S. bond paying 8 percent coupon. The interest is 10 percent. Find the...

Consider a 30-year U.S. bond paying 8 percent coupon. The interest is 10 percent.

Find the bond’s Macaulay duration?
Find the bond’s Modified duration.?
If the interest rate falls by 10 basis points, what is the exact percentage change in the bond price?
If the interest rate falls by 10 basis points, what is the approximate percentage change in the bond price?

Expert Solution

Face value (F) = 1000

Maturity(t) = 30

Coupon rate (c) = 0.08

YTM(y) = 0.10

a. Macaulay Duration of Bond(D):

b. Modified Duration of Bond (M'D):

c.

Current Price of Bond(P0):

Change in interest rate (YTM) = -0.10%

New YTM(y) = 9.90%

New Price of Bond (P1):

Exact percentage change in Bond Price:

d.

approximate percentage change in the bond price:

jeff jeffy answered 1 year ago

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