Question 11A 3-year 10% annual coupon bond yields 5%. The dollar price for the face value of $1000 is$1,136.1624. The Macaulay duration of the bond is 2.7525.The Modified Duration of the bond is equal to:Question 12years (4 decimals).11Continuing with Q11, if the yield to maturity increases 50 bp = 0.5%, then according to the (mod)duration approximation, the price of the bond will change to: $ .

Price of bond is $1,136.1624 Macaulay duration is 2.7525 YTM is 5% To Find: Modified duration New price of bondWe have; Macaulay duration as 2.7525 YTM = 5% Modified duration = Macaulay duration1+ YTM=2.75251+5%=2.6214 Therefore; Modified duration of bond is 2.6214 Change in price = -modified duration ×Bond price×change in yield=-2.6214×1136.1624×0.5%=-14.8918 therefore; Change in price is -$14.8918 Now; New price of bond = price of bond +Change in price =$1,136.1624-14.8918= $1,121.2706 Therefore; New price of bond is $1,121.2706

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A 3-year 10% annual coupon bond yields 5%. The dollar price for the face value of $1000 is $1,136.1624. The Macaulay duration of the bond is 2.7525. The Modified Duration of the bond is equal to: years (4 decimals).

A 3-year 10% annual coupon bond yields 5%. The dollar price for the face value of $1000 is $1,136.1624. The Macaulay duration of the bond is 2.7525. The Modified Duration of the bond is equal to: years (4 decimals).

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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