Consider the following two-bond portfolio of option-free bonds; Bond A Bond B Years to maturity 5 years 10 years Coupon rate 5% 5% Par value 1000 1000 Yield to maturity 8% 6% Par amount owned R3,45 million R2 million Market value R30 367.59 (in 000’s) R18 528 (in 000’s) Assuming that bond A is an option-free bond, calculate the bond's modified duration using Macauly's duration. Answer should be given in the format: Macauly's duration= Modified Duration=
Please help, this is an example out of our textbook that needs to be done in preperation for our test later this week. Due to online learning I have fallen behind and don't know what steps to follow or what formulas to use.
Consider the following two-bond portfolio of option-free bonds;
|
|
Bond A |
Bond B |
|
Years to maturity |
5 years |
10 years |
|
Coupon rate |
5% |
5% |
|
Par value |
1000 |
1000 |
|
Yield to maturity |
8% |
6% |
|
Par amount owned |
R3,45 million |
R2 million |
|
Market value |
R30 367.59 (in 000’s) |
R18 528 (in 000’s) |
Assuming that bond A is an option-free bond, calculate the bond's modified duration using Macauly's duration.
Answer should be given in the format:
Macauly's duration=
Modified Duration=
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