Consider the following fixed income security: Par: $1000 Coupon rate: 4% Maturity: 5 years YTM: 3.5% 7. What is the value of this bond? 8. What is Macauley’s Duration of this bond? 9. Were you to replicate the bond by holding a 1-year maturity Zero and a perpetuity at 4%, what percentage would you invest in the Zeros to match the bond?
Consider the following fixed income security: Par: $1000 Coupon rate: 4% Maturity: 5 years YTM: 3.5% 7. What is the value of this bond? 8. What is Macauley’s Duration of this bond? 9. Were you to replicate the bond by holding a 1-year maturity Zero and a perpetuity at 4%, what percentage would you invest in the Zeros to match the bond?
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter4: Bond Valuation
Section: Chapter Questions
Problem 5MC: What would be the value of the bond described in Part d if, just after it had been issued, the...
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Consider the following fixed income security:
Par: $1000
Coupon rate: 4%
Maturity: 5 years
YTM: 3.5%
7. What is the
8. What is Macauley’s Duration of this bond?
9. Were you to replicate the bond by holding a 1-year maturity Zero and a perpetuity at 4%, what
percentage would you invest in the Zeros to match the bond?9
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