(a) Determine what is the payment stream of the bond. (b) Determine the effective duration of the bond's payments if interest is compounded annually at rate 3%. State your answer to three significant figures. (c) Find the duration of the bond's payments if interest is compounded continuously at rate 3%. State your answer to three significant figures.

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
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Consider a 3 year bond with face value £150,000 with annual coupons paid at rate 5.1% and redeemable at face value

(a) Determine what is the payment stream of the bond.
(b) Determine the effective duration of the bond's payments if interest is
compounded annually at rate 3%. State your answer to three significant figures.
(c) Find the duration of the bond's payments if interest is compounded
continuously at rate 3%. State your answer to three significant figures.
Transcribed Image Text:(a) Determine what is the payment stream of the bond. (b) Determine the effective duration of the bond's payments if interest is compounded annually at rate 3%. State your answer to three significant figures. (c) Find the duration of the bond's payments if interest is compounded continuously at rate 3%. State your answer to three significant figures.
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