Question 3: A bond with a remaining maturity of exactly 4 years pays 6.0% annual coupon. Its face value is $1,000. The current yield-to-maturity of the bond is 5.5%. A. Calculate the current price of the bond. B. Using the timeline method, calculate the modified duration of the bond. C. Using just the modified duration, what is the expected change in the price of the bond when YTM is 5.70%?
Question 3: A bond with a remaining maturity of exactly 4 years pays 6.0% annual coupon. Its face value is $1,000. The current yield-to-maturity of the bond is 5.5%. A. Calculate the current price of the bond. B. Using the timeline method, calculate the modified duration of the bond. C. Using just the modified duration, what is the expected change in the price of the bond when YTM is 5.70%?
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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Transcribed Image Text:Question 3: A bond with a remaining maturity of exactly 4 years pays 6.0% annual coupon. Its face value is $1,000. The current yield-to-maturity of
the bond is 5.5%.
A. Calculate the current price of the bond.
B. Using the timeline method, calculate the modified duration of the bond.
C. Using just the modified duration, what is the expected change in the price of the bond when YTM is 5.70%?
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