Consider the following newly issued bonds: Inputs Juan Rojo, Incorporated 10-Year Bond McAllister Avionics 9-Year Bond Settlement Date 01-01-2020 01-01-2020 Maturity Date 01-01-2030 01-01-2029 Coupon Rate 0.080 0.050 Redemption Value 100 100 Coupons per Year 2 1 Market Data Initial Yield 0.075 Yield Change 0.010 Required: Using any necessary data above, calculate the Price, the Macaulay Duration and the Modified Duration for each bond. Then, predict the price change given a change in the prevailing yield. Then, assume the market yield changed, as described below. In the second table, calculate the approximate price change and new price according to duration (the first-order approximation). (Use cells A5 to C13 from the given information to complete this question.) Juan Rojo, Incorporated 10-Year Bond McAllister Avionics 9-Year Bond Initial Price Macaulay Duration Modified Duration First-Order Approximation, Price Change Juan Rojo, Incorporated 10-Year Bond McAllister Avionics 9-Year Bond Price Change New Price
Consider the following newly issued bonds: Inputs Juan Rojo, Incorporated 10-Year Bond McAllister Avionics 9-Year Bond Settlement Date 01-01-2020 01-01-2020 Maturity Date 01-01-2030 01-01-2029 Coupon Rate 0.080 0.050 Redemption Value 100 100 Coupons per Year 2 1 Market Data Initial Yield 0.075 Yield Change 0.010 Required: Using any necessary data above, calculate the Price, the Macaulay Duration and the Modified Duration for each bond. Then, predict the price change given a change in the prevailing yield. Then, assume the market yield changed, as described below. In the second table, calculate the approximate price change and new price according to duration (the first-order approximation). (Use cells A5 to C13 from the given information to complete this question.) Juan Rojo, Incorporated 10-Year Bond McAllister Avionics 9-Year Bond Initial Price Macaulay Duration Modified Duration First-Order Approximation, Price Change Juan Rojo, Incorporated 10-Year Bond McAllister Avionics 9-Year Bond Price Change New Price
Chapter7: Types And Costs Of Financial Capital
Section: Chapter Questions
Problem 2EP
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Question
Consider the following newly issued bonds: | ||||
Inputs | Juan Rojo, Incorporated 10-Year Bond | McAllister Avionics 9-Year Bond | ||
Settlement Date | 01-01-2020 | 01-01-2020 | ||
Maturity Date | 01-01-2030 | 01-01-2029 | ||
Coupon Rate | 0.080 | 0.050 | ||
Redemption Value | 100 | 100 | ||
Coupons per Year | 2 | 1 | ||
Market Data | ||||
Initial Yield | 0.075 | |||
Yield Change | 0.010 | |||
Required: | ||||
Using any necessary data above, calculate the Price, the Macaulay Duration and the Modified Duration for each bond. Then, predict the price change given a change in the prevailing yield. Then, assume the market yield changed, as described below. In the second table, calculate the approximate price change and new price according to duration (the first-order approximation). | ||||
(Use cells A5 to C13 from the given information to complete this question.) | ||||
Juan Rojo, Incorporated 10-Year Bond | McAllister Avionics 9-Year Bond | |||
Initial Price | ||||
Macaulay Duration | ||||
Modified Duration | ||||
First-Order Approximation, Price Change | Juan Rojo, Incorporated 10-Year Bond | McAllister Avionics 9-Year Bond | ||
Price Change | ||||
New Price | ||||
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