Bond A Coupon 8% Yield to maturity 8% Maturity (years) 2 Par Price Bond B 9% 8% 5 $100.00 $100.00 $100.00 $104.055 (a) Calculate the actual price of the bonds for a 100-basis-point (1% annual) increase in interest rates. (b) Using (modified) duration, estimate the price of the bonds for a 100-basis-
Bond A Coupon 8% Yield to maturity 8% Maturity (years) 2 Par Price Bond B 9% 8% 5 $100.00 $100.00 $100.00 $104.055 (a) Calculate the actual price of the bonds for a 100-basis-point (1% annual) increase in interest rates. (b) Using (modified) duration, estimate the price of the bonds for a 100-basis-
Excel Applications for Accounting Principles
4th Edition
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Gaylord N. Smith
Chapter11: Bond Pricing And Amortization (bonds)
Section: Chapter Questions
Problem 3R
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Question
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3) Answer the below questions for bonds A and B.
Bond A 8% 8%
2
$100.00 $100.00 $100.00 $104.055
Coupon
Yield to maturity Maturity (years) Par
Price
Bond B 9%
8%
(a) Calculate the actual price of the bonds for a 100-basis-point (1% annual) increase in interest rates.
(b) Using (modified) duration, estimate the price of the bonds for a 100-basis-
5
point (1% annual) increase in interest rates.
(c) Explain why your answers in parts (a) and (b) differ.
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