An investor owns a bond with a modified duration of 0,5. At the moment YTM for...

An investor owns a bond with a modified duration of 0,5. At the moment YTM for that bond is equal to 3,28%. What will be the magnitude of bond price change if YTM for the bond changes to 3,58%. Explain how can you improve accuracy of estimation of a bond price change resulting from the change of market interest rates

Expert Solution

Change in Price = -Modified Duration (Change in YTM)

Change in Price = -0.50(0.0030)

Change in Price = -0.15%

jeff jeffy answered 2 years ago

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