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A 4-year coupon bond has payments as follows: Bond Cash Flow                         Year 1    £5                         Year 2   £5                         Year 3    £5                         Year 4    £105 The 5% coupon bond is currently trading at par (£100). Compute the duration of the bond. How much do you expect this bond’s price to rise if the yield increases by 1 percent?

A 4-year coupon bond has payments as follows: Bond Cash Flow                         Year 1    £5                         Year 2   £5                         Year 3    £5                         Year 4    £105 The 5% coupon bond is currently trading at par (£100). Compute the duration of the bond. How much do you expect this bond’s price to rise if the yield increases by 1 percent?

Essentials Of Investments
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
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A 4-year coupon bond has payments as follows:

Bond Cash Flow

                        Year 1    £5

                        Year 2   £5

                        Year 3    £5

                        Year 4    £105

The 5% coupon bond is currently trading at par (£100). Compute the duration of the bond. How much do you expect this bond’s price to rise if the yield increases by 1 percent?

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