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hree years ago ABC issued a high-yield bond with 1%, paying semi- annual coupons. When original as sold at par and had five years until maturity. Cu ave a yield - to - maturity of 16%, and the next cou onth from today. By how much is the duration of A

hree years ago ABC issued a high-yield bond with 1%, paying semi- annual coupons. When original as sold at par and had five years until maturity. Cu ave a yield - to - maturity of 16%, and the next cou onth from today. By how much is the duration of A

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
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Three years ago ABC issued a high - yield bond with a coupon rate of 14%, paying semi-annual coupons. When originally issued the bond was sold at par and had five years until maturity. Currently, ABC bonds have a yield - to - maturity of 16%, and the next coupon payment is in 6 month from today. By how much is the duration of ABC bonds higher than that of an XYZ rated zero - coupon bond with an interest rate of 9% (APR, annually compounded) and 18 months until maturity? Note, report a negative number if LPH has the lower duration of the two bonds.
Transcribed Image Text:Three years ago ABC issued a high - yield bond with a coupon rate of 14%, paying semi-annual coupons. When originally issued the bond was sold at par and had five years until maturity. Currently, ABC bonds have a yield - to - maturity of 16%, and the next coupon payment is in 6 month from today. By how much is the duration of ABC bonds higher than that of an XYZ rated zero - coupon bond with an interest rate of 9% (APR, annually compounded) and 18 months until maturity? Note, report a negative number if LPH has the lower duration of the two bonds.
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