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.
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.
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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- 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.
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