Question

In: Finance

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?

Solutions

Expert Solution

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

Cell reference -


Related Solutions

There is a bond with FV = 1000, coupon rate of 10% paid annually and 5...
There is a bond with FV = 1000, coupon rate of 10% paid annually and 5 year maturity. At year 0, YTM = 8%. Given constant YTM, what is the bond price at time 1? What is capital gain yield and current yield? What are the prices of the bond in year 2, 3, 4, and 5? If at year 1, YTM becomes 12%, what is a bond price in year 1?
Suppose the coupon rate on a bond is 10% paid annually, the yield to maturity is...
Suppose the coupon rate on a bond is 10% paid annually, the yield to maturity is 12%, the face value of the bond is $1000, the maturity is 2 years, and the price of the bond is $966.20. a. According to his information, you can say that this bond is sold on the market: A) at par value B) at a premium C) at a discount b. Using the information provided above, calculate the duration of the annual coupon bond:...
Suppose the YTM is 5% for a 20-year $1000 bond with a 7% coupon rate and...
Suppose the YTM is 5% for a 20-year $1000 bond with a 7% coupon rate and annual coupon payments. Its bond price is $____. Instruction: Type ONLY your numerical answer in the unit of dollars, NO $ sign, NO comma, and round to one decimal place. E.g., if your answer is $7,001.56, should type ONLY the number 7001.6, NEITHER 7,001.6, $7001.6, $7,001.6, NOR 7002. Otherwise, Blackboard will treat it as a wrong answer.
What is the coupon rate of a 4-year, $1000 bond with coupons paid annually and a...
What is the coupon rate of a 4-year, $1000 bond with coupons paid annually and a price of $850, if it has a yield to maturity of 12%? Note: Express your answers in strictly numerical terms. For example, if the answer is 5%, write enter 0.05 as an answer."
5. A bond offers a coupon rate of 7%, paid annually, and has a maturity of...
5. A bond offers a coupon rate of 7%, paid annually, and has a maturity of 18 years. If the current market yield is 9% (discount rate), what should be the price of this bond? 6. A bond offers a coupon rate of 10%, paid semiannually, and has a maturity of 6 years. If the current market yield is 6%, what should be the price of this bond?
A 7 3/5% bond matures in 10 years. Assuming the coupon is paid annually and the...
A 7 3/5% bond matures in 10 years. Assuming the coupon is paid annually and the par value is $1,000, what is the value of this bond to an investor requiring a 9% rate of return? A) $895.71 B) $954.05 C) $910.15 D) $848.83
Assume a 7-year zero coupon bond with $1000 face value with a yield of 7% (continuously...
Assume a 7-year zero coupon bond with $1000 face value with a yield of 7% (continuously compounding). Wherever applicable, use e = 2.71828. • What is the price of the bond? • Use the duration to calculate the effect on the bond’s price of a 0.5% decrease on its yield. • Recalculate the bond’s price on the basis of a 6.5% per annum yield and verify that your result in (b) is a good approximation of the change in the...
Holly bought a 7-year bond, with a 3% coupon paid semi annually. It was priced to...
Holly bought a 7-year bond, with a 3% coupon paid semi annually. It was priced to yield 3% when she bought it. What is the effective duration assuming a 100-basis point change in interest rates?
A $1,000 bond with a coupon rate of 5% paid semi-annually has 7 years to maturity...
A $1,000 bond with a coupon rate of 5% paid semi-annually has 7 years to maturity and a yield to maturity of 9%. The price of the bond is closest to $________. Input your answer without the $ sign and round your answer to two decimal places.
Consider a 5-year, $1000 bond, with 7% coupon rate making semiannual coupon payment. The yield curve is flat at YTM=6%.
Consider a 5-year, $1000 bond, with 7% coupon rate making semiannual coupon payment. The yield curve is flat at YTM=6%. 1. What is the price of the bond? 2. What is the duration of the bond? 3. Use the duration rule to calculate the change in price when interest rates go up by 3% (300 bps). Use the following information to answer three question
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT