Suppose that there’s a 7% 5-year coupon (paid annually) bond with F = $1000 and yield...

Suppose that there’s a 7% 5-year coupon (paid annually) bond with F = $1000 and yield to maturity 7.5%.
a. What is the bond’s modified duration?
b. What is the percent change in value of this bond using duration only if rates change +/- 2
percentage points?
c. How do these calculations compare to the actual percent price changes?

Expert Solution

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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