Question 3: The table below gives the prices (per 100 of par value), coupon rates, maturities, and yield-to-maturities o

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Question 3 The Table Below Gives The Prices Per 100 Of Par Value Coupon Rates Maturities And Yield To Maturities O 1 (50.22 KiB) Viewed 37 times

Question 3: The table below gives the prices (per 100 of par value), coupon rates, maturities, and yield-to-maturities of two emerging market sovereign debt. The coupon payments are annual, and yield-to-maturities are effective annual rates. a) Compute the approximate modified duration of each of the two bonds using a lbp change in the yield-to- maturity (must show your calculations to earn full credit). (3pt) b) Which of the two bonds is expected to have higher percentage price increase if the yield-to-maturity on each decreases by the same small amount? Why? (2pt) (Hint: Generally, duration increases as maturity increases. But, for discount bonds, this may not necessarily be true.) Coupon Maturity YTM Market Price 51.304203 10% 20 years 20% 10% 30 years 50.210636 20% 7 B