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 newly issued bonds: | ||||
| Inputs | Juan Rojo, Incorporated 10-Year Bond | McAllister Avionics 9-Year Bond | ||
| Settlement Date | 01-01-2020 | 01-01-2020 | ||
| Maturity Date | 01-01-2030 | 01-01-2029 | ||
| Coupon Rate | 0.080 | 0.050 | ||
| Redemption Value | 100 | 100 | ||
| Coupons per Year | 2 | 1 | ||
| Market Data | ||||
| Initial Yield | 0.075 | |||
| Yield Change | 0.010 | |||
| Required: | ||||
| Using any necessary data above, calculate the Price, the Macaulay Duration and the Modified Duration for each bond. Then, predict the price change given a change in the prevailing yield. Then, assume the market yield changed, as described below. In the second table, calculate the approximate price change and new price according to duration (the first-order approximation). | ||||
| (Use cells A5 to C13 from the given information to complete this question.) | ||||
| Juan Rojo, Incorporated 10-Year Bond | McAllister Avionics 9-Year Bond | |||
| Initial Price | 103.47 | 84.05 | ||
| Macaulay Duration | 7.12 | 7.30 | ||
| Modified Duration | 6.87 | 6.79 | ||
| First-Order Approximation, Price Change | Juan Rojo, Incorporated 10-Year Bond | McAllister Avionics 9-Year Bond | ||
| Price Change | ||||
| New Price | ||||
Need the Price Change and New Price numbers for this questions. Thank you in advance
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