1) ( s) A four-year bond with a yield of 10% (continuously compounded) pays an 20% coupon at the end of each year. (e-0.1 = 0.9, e-0.2 - 0.8, e-0.3 - 0.7, e-0.4 = 0.6) a) What is the bond's price? b) What is the bond's duration? c) Use the duration to calculate the effect on the bond's price of a 0.15% increase in its yield.
1) ( s) A four-year bond with a yield of 10% (continuously compounded) pays an 20% coupon at the end of each year. (e-0.1 = 0.9, e-0.2 - 0.8, e-0.3 - 0.7, e-0.4 = 0.6) a) What is the bond's price? b) What is the bond's duration? c) Use the duration to calculate the effect on the bond's price of a 0.15% increase in its yield.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:1) (
end of each year. (e¬0.1 = 0.9, e¬0.2 = 0.8, e-0.3 = 0.7, e-0.4 - 0.6)
s) A four-year bond with a yield of 10% (continuously compounded) pays an 20% coupon at the
a) What is the bond's price?
b) What is the bond's duration?
c) Use the duration to calculate the effect on the bond's price of a 0.15% increase in its yield.
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