Bond has a duration of 3.15 and a convexity of 200. The yield of the bond is 5% what is the best approximations of the percentage change in the bonds price is interest increases from 5% to 6%
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3.Bond has a duration of 3.15 and a convexity of 200. The yield of the bond is 5% what is the best approximations of the percentage change in the
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- K Assume that a bond will make payments every six months as shown on the following timeline (using six-month periods): 0 2 5 Period $19.53 a. What is the maturity of the bond (in years)? b. What is the coupon rate (as a percentage)? c. What is the face value? Cash Flows View an example Get more help. ★ a. What is the maturity of the bond (in years)? The maturity is years. (Round to the nearest integer.) A 6 1 MacBook Pro & 7 $19.53 * 8 9 C 59 $19.53 60 $19.53+$1,000 Clear all BUB 0 {Q2. Duration and Convexity Bond A has face value at $1,000, coupon rate of 6% paid semi-annually, 5 years to maturity, and a yield to maturity of 7%. a. Using the bond pricing formula, calculate the price of the bond and duration. ABC b. Calculate the convexity of the bond. c. Using the calculations from above, what is the "approximated bond price change" using duration and convexity, if the interest rate increases by 1%? d. What is the actual change in the bond price if the interest rate increases by 1%? e. Based on c) and d) above, discuss the roles of duration and convexity in estimating the price change. Which risk measure plays a bigger role? f. Suppose you have two bonds with the same maturity date but one bond has a 10% coupon rate while the other has a 5% coupon rate. Which of these two bonds would have a higher duration?5. Consider a bond that offers a nominal yield of 6%. If the expected rate of inflation is 3%, according to the Fisher Effect, what is the real yield of the bond? (2 points) A) 2.91% of B) 3.00% C) 5.83% D) 9.00% evijegen inuocaib enom agnibivonq ylevitoste 1
- A bond has a Macaulay duration equal to 9.5 and a yield to maturity of 7.5%. What is the modified duration of this bond? The modified duration of this bond is (Round to two decimal places.)Question 1. Duration and Banking Consider a 5-year bond with annual coupon payments. The bond has a face value (prin- cipal) of $100 and sells for $95. Its coupon rate is 3%. (The coupon rate is the ratio between the coupon value and the face value). The face value is paid at the maturity year in addition to the last coupon payment. 1. Calculate the bond's yield to maturity (YTM) and duration using its YTM. 2. Suppose the bond's YTM changes in the same way as a 5-year T-bill interest rate. Use the bond's modified duration to evaluate the relative change in the 5-year bond's value if the interest rate on 5-year T-bills falls by one basis point, that is, by 0.0001. This part was extracted from the balance sheet of the First Bank of Australia: Assets (Billion AUD) Bond 80 Liabilities (Billion AUD) Fixed-rate liabilities 60 where "Bond" here refers to the bond we specified above and the fixed-rate liabilities (banks future payment obligations) have an average duration of 4 years and YTM of…Consider a bond with a modified duration (in years) of 3.2. Coupon rate and yield to maturity are the same. Par value is $1,000. Estimate the percentage change in price for a 200 basis-point increase in interest rates. А. -5.4% B. -6.4% С. -8.6% D. 4.8% QUESTION 15 Using the information in Question 14 above, estimate the price of the bond for a 200 basis-point increase in interest rates. А. $936 В. $1002 C. $964 D. $1012
- Q2. Duration and Convexity Bond A has face value at $1,000, coupon rate of 6% paid semi-annually, 5 years to maturity, and a yield to maturity of 7%. Using the bond pricing formula, calculate the price of the bond and duration. Calculate the convexity of the bond. Using the calculations from above, what is the “approximated bond price change” using duration and convexity, if the interest rate increases by 1%? What is the actual change in the bond price if the interest rate increases by 1%? Based on c) and d) above, discuss the roles of duration and convexity in estimating the price change. Which risk measure plays a bigger role? Suppose you have two bonds with the same maturity date but one bond has a 10% coupon rate while the other has a 5% coupon rate. Which of these two bonds would have a higher duration?f the interest rate increases from 2% to 4%, given the duration of the bond equals 1.5, the price of the bond will a. increase by 2.9412%. b. decrease by 2.8846%. c. increase by 0.02885%. d. decrease by 2.9412%.Which bond is more sensitive to an interest rate change of 1 percent? Bond A: Yield to maturity = 4.00%, maturity = 8 years, coupon = 6% or £60, face value = £1,000. OR Bond B: Yield to maturity = 3.50%, maturity = 5 years, coupon = 7% or £70, face value = £1,000. A. Bond A B. Bond B C. Cannot be determined D. Both are equally sensitive.
- Assume that a $10,000.00 bond paying 8.5% interest is currently selling at 106. a. What is the current selling price of the bond?b. What is the current yield of this bond?A bond with a 9-year duration is worth $1,080, and its yield to maturity is 8%. The yield tomaturity falls to 7.84%.a. Calculate the percentage change in price as yield falls.b. Calculate the new value of the bond as yield falls.5. A bond is currently selling at $1,034.5. This bond has a yield-to-maturity (market interest rate) of 6.36% and a duration of 8. If the market interest rate decreases by 40 basis points, calculate the new price of the bond. 11
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