A bond has three years to maturity and a 7 percent yield to maturity (continuously compounded). The bond pays a 9 percen
Posted: Tue Jan 18, 2022 1:00 pm
A bond has three years to maturity and a 7 percent yield to
maturity (continuously compounded). The bond pays a 9 percent
coupon at the end of each year. The par value of the bond is
$100.
a) Calculate the bond’s price.
b) Compute the bond’s duration.
c) Use the duration from (b) to calculate the effect on the
bond’s price of a 1 percent decrease in its yield. What is the new
bond’s price?
maturity (continuously compounded). The bond pays a 9 percent
coupon at the end of each year. The par value of the bond is
$100.
a) Calculate the bond’s price.
b) Compute the bond’s duration.
c) Use the duration from (b) to calculate the effect on the
bond’s price of a 1 percent decrease in its yield. What is the new
bond’s price?