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An 8% 15 year bond has a ytm of 7%. If the ytm falls by 1%,...

An 8% 15 year bond has a ytm of 7%. If the ytm falls by 1%, what will the new price be? What will it be approximately? Is duration adequate to describe this bond?

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ANSWER IN THE IMAGE((YELLOW HIGHLIGHTED). FEEL FREE TO ASK ANY DOUBTS. THUMBS UP PLEASE. 1. NEW PRICE.2. APPROX NEW PRICE. NO, DURATION IS NOT ENOUGH FOR A LARGE CHANGE (100 BASIS POINTS) BECAUSE IT DOES NOT TAKE INTO CONSIDERATION THE CONVEXITY OF THE PRICE CHANGE.

jeff jeffy answered 1 year ago
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