It is 7/15/24, and you are considering two corporate bonds. The first bond has a 7.2% coupon rate and matures on 1/15/29. The second bond has a 2.1% coupon rate and matures on 1/15/27. Both bonds are priced to yield 14.2% if held to maturity. Use the spreadsheet method to calculate the Macaulay and Modified Durations for each bond. Assume that each bond has a $100 par value for your calculations. (25.5 points total) Date Time (In Years) Bond 1 CF Bond 2 CF Bond 1 PV Bond 2 PV Bond 1 w Bond 2 w Bond 1 wxt Bond 2 wxt 1/15/25 7/15/25 1/15/26 7/15/26 1/15/27 7/15/27 1/15/28 7/15/28 1/15/29 Bond 1 Bond 2 Macaulay Duration Modified Duration You do not know if you will be able to hold the bond you pick until maturity. If you think interest rates are likely to rise in the future, which bond would be the better choice based on duration to two decimal places? (4.5 points) Which Bond?
It is 7/15/24, and you are considering two corporate bonds. The first bond has a 7.2% coupon rate and matures on 1/15/29. The second bond has a 2.1% coupon rate and matures on 1/15/27. Both bonds are priced to yield 14.2% if held to maturity. Use the spreadsheet method to calculate the Macaulay and Modified Durations for each bond. Assume that each bond has a $100 par value for your calculations. (25.5 points total) Date Time (In Years) Bond 1 CF Bond 2 CF Bond 1 PV Bond 2 PV Bond 1 w Bond 2 w Bond 1 wxt Bond 2 wxt 1/15/25 7/15/25 1/15/26 7/15/26 1/15/27 7/15/27 1/15/28 7/15/28 1/15/29 Bond 1 Bond 2 Macaulay Duration Modified Duration You do not know if you will be able to hold the bond you pick until maturity. If you think interest rates are likely to rise in the future, which bond would be the better choice based on duration to two decimal places? (4.5 points) Which Bond?
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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Transcribed Image Text:It is 7/15/24, and you are considering two corporate bonds. The first bond has a 7.2% coupon
rate and matures on 1/15/29. The second bond has a 2.1% coupon rate and matures on
1/15/27. Both bonds are priced to yield 14.2% if held to maturity. Use the spreadsheet method
to calculate the Macaulay and Modified Durations for each bond. Assume that each bond has a
$100 par value for your calculations. (25.5 points total)
Date
Time (In Years)
Bond 1 CF
Bond 2 CF
Bond 1 PV
Bond 2 PV
Bond 1 w
Bond 2 w
Bond 1 wxt
Bond 2 wxt
1/15/25
7/15/25
1/15/26
7/15/26
1/15/27
7/15/27
1/15/28
7/15/28
1/15/29
Bond 1
Bond 2
Macaulay Duration
Modified Duration
You do not know if you will be able to hold the bond you pick until maturity. If you think interest
rates are likely to rise in the future, which bond would be the better choice based on duration to
two decimal places? (4.5 points)
Which Bond?
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