24. A P1M 6% annual coupon bond has been issued at a price of 95. Its maturity is 4 years. Answer the following: a. Compute the YTM for the bond. b. Compute the Macaulay Duration for the bond using the tabular form. C. Compute the Modified duration. deg?
24. A P1M 6% annual coupon bond has been issued at a price of 95. Its maturity is 4 years. Answer the following: a. Compute the YTM for the bond. b. Compute the Macaulay Duration for the bond using the tabular form. C. Compute the Modified duration. deg?
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
Related questions
Question
Answer the following.
Transcribed Image Text:24. A P1M 6% annual coupon bond has been issued at a price of 95. Its maturity is 4 years. Answer the
following:
a. Compute the YTM for the bond.
b. Compute the Macaulay Duration for the bond using the tabular form.
C. Compute the Modified duration.
d.
If the YTM goes to 6%, what is the new bond price?
e.
f.
Using the YTM in letter a, what is the convexity of the bond?
Assuming a 200 BP decline in YTM, what is the duration change? (use the modified duration in no.
c)
g.
What is the convexity change?
h.
What is the combined effect of the duration change and convexity change?
i. What will be the new price base on no. h?
25. There is a 25-year bond issued by the Republic of the Philippines last May 1, 2015 with a coupon of
8% paid out every May 1 and November 1. Answer the following questions:
1. Assuming that you wish to invest in this bond on May 1, 2020, when the prevailing interest rate is
9%, what is the purchase price for this bond?
2. What is the total investment for this bond if you want to purchase P10 million?
3. What is the yield to maturity for this bond?
4. What is the Macaulay Duration for this bond on the date of issue?
5. Base on no. 4, what is the Modified Duration for this bond on the date of issue?
6. Base on no. 5, if the YTM goes from 8% to 9%, what is the new price of the bond?
7. What is the Macaulay Duration for this bond on the purchase date?
8. Base on no. 7, what is the Modified Duration for this bond on the purchase date?
9. Base on no. 8, if the YTM goes from 8% to 9%, what is the new price of the bond?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 1 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education