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Coupon Yield to maturity Maturity (years) Par Price Bond B 9% 8% Bond A 8% 8% 2 5 $100.00 $100.00 $100.00 $104.055 (a) Calculate the actual price of the bonds for a 100-basis-point (1% annual) increase in interest rates. (b) Using (modified) duration, estimate the price of the bonds for a 100-basis-

Coupon Yield to maturity Maturity (years) Par Price Bond B 9% 8% Bond A 8% 8% 2 5 $100.00 $100.00 $100.00 $104.055 (a) Calculate the actual price of the bonds for a 100-basis-point (1% annual) increase in interest rates. (b) Using (modified) duration, estimate the price of the bonds for a 100-basis-

Essentials Of Investments
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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Coupon Yield to maturity Maturity (years) Par Price Bond A 8% 8% 2 5 $100.00 $100.00 $100.00 $104.055 Bond B 9% 8% (a) Calculate the actual price of the bonds for a 100-basis-point (1% annual) increase in interest rates. (b) Using (modified) duration, estimate the price of the bonds for a 100-basis- point (1% annual) increase in interest rates.
Transcribed Image Text:Coupon Yield to maturity Maturity (years) Par Price Bond A 8% 8% 2 5 $100.00 $100.00 $100.00 $104.055 Bond B 9% 8% (a) Calculate the actual price of the bonds for a 100-basis-point (1% annual) increase in interest rates. (b) Using (modified) duration, estimate the price of the bonds for a 100-basis- point (1% annual) increase in interest rates.
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