10) Suppose a coupon bond with 10 years remaining to maturity is reported to have a durationequal to 6.7 years. Assuming a current interest rate of 9% and an estimated decrease in theinterest rate to 8.8%, calculate the estimated percentage increase in the bond's price. Hint:Duration=a) 3.3%b) 2.7%c) 1.2%d) 0.6%%APAi/(1+io)

Years to maturity = 10Duration = 6.7 yearsInterest rate = 9%Decreased interest rate = 8.8%To find:…

10) Suppose a coupon bond with 10 years remaining to maturity is reported to have a duration interest rate to 8.8%, calculate the estimated percentage increase in the bond's price. Hint: Duration = %AP a) 3.3% b) 2.7% c) 1.2% d) 0.6% Ai/(1+io)

10) Suppose a coupon bond with 10 years remaining to maturity is reported to have a duration interest rate to 8.8%, calculate the estimated percentage increase in the bond's price. Hint: Duration = %AP a) 3.3% b) 2.7% c) 1.2% d) 0.6% Ai/(1+io)

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

10) Suppose a coupon bond with 10 years remaining to maturity is reported to have a duration
equal to 6.7 years. Assuming a current interest rate of 9% and an estimated decrease in the
interest rate to 8.8%, calculate the estimated percentage increase in the bond's price. Hint:
Duration=
a) 3.3%
b) 2.7%
c) 1.2%
d) 0.6%
%AP
Ai/(1+io)

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