(a) Calculate the prices for bond B, C and D. (b) Calculate the duration for all bonds. (c) Calculate the duration adjusted for convexity for all bonds.
Consider four different bonds all having the same yield-to-maturity. Bond A is a consol that pays $50 every period forever and is currently priced at $714.29. Bond B, C and D have the same par value of $1,000. However, they differ in their maturity and coupon rate. Bond B and C have a maturity of 5 years, while bond D has a maturity of 10
years. Also, bond B and D have a coupon rate of 6%, while bond C has a coupon rate of 8%. [Hint: Coupons are paid annually to faciliate the calculations. Hence, coupon rates are also given annually. You may want to resort to the
(a) Calculate the prices for bond B, C and D.
(b) Calculate the duration for all bonds.
(c) Calculate the duration adjusted for convexity for all bonds.
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