Three years ago ABC issued a high - yield bond with a coupon rate of14%, paying semi-annual coupons. When originally issued the bondwas sold at par and had five years until maturity. Currently, ABC bondshave a yield - to - maturity of 16%, and the next coupon payment is in 6month from today. By how much is the duration of ABC bonds higherthan that of an XYZ rated zero - coupon bond with an interest rate of9% (APR, annually compounded) and 18 months until maturity? Note,report a negative number if LPH has the lower duration of the twobonds.

Duartion of bond shows the weighted period of bond required to receive all cash flow from the bond.

hree years ago ABC issued a high-yield bond with 1%, paying semi- annual coupons. When original as sold at par and had five years until maturity. Cu ave a yield - to - maturity of 16%, and the next cou onth from today. By how much is the duration of A

hree years ago ABC issued a high-yield bond with 1%, paying semi- annual coupons. When original as sold at par and had five years until maturity. Cu ave a yield - to - maturity of 16%, and the next cou onth from today. By how much is the duration of A

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

Problem 1PS

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Question

Three years ago ABC issued a high - yield bond with a coupon rate of
14%, paying semi-annual coupons. When originally issued the bond
was sold at par and had five years until maturity. Currently, ABC bonds
have a yield - to - maturity of 16%, and the next coupon payment is in 6
month from today. By how much is the duration of ABC bonds higher
than that of an XYZ rated zero - coupon bond with an interest rate of
9% (APR, annually compounded) and 18 months until maturity? Note,
report a negative number if LPH has the lower duration of the two
bonds.

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