A. What is the duration of a two-year bond that pays an annual coupon of 10% and whose current yield to maturity is 14%? Use $1,000 as the face value. (Do not round intermediate

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
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Answer both
A. What is the duration of a two-year bond that
pays an annual coupon of 10% and whose
current yield to maturity is 14%? Use $1,000 as
the face value. (Do not round intermediate
calculations. Round your answer to 3 decimal
places. (e.g., 32.161)
B. What is the expected change in the price of
the bond if interest rates are expected to
decline by 0.5%? (Do not round intermediate
calculations. Round your answer to 2 decimal
places. (e.g., 32.16)
Transcribed Image Text:A. What is the duration of a two-year bond that pays an annual coupon of 10% and whose current yield to maturity is 14%? Use $1,000 as the face value. (Do not round intermediate calculations. Round your answer to 3 decimal places. (e.g., 32.161) B. What is the expected change in the price of the bond if interest rates are expected to decline by 0.5%? (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16)
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