Sarah just used $95.05 purchased a Treasury bond. Assume that the yield rate for this bond is j2 =3.61% p.a. and the duration of this bond is 2.74 years. Without actually calculating the new price for this bond, use the bond price and the duration value to estimate (use the price sensitivity formula) the change in price of this bond that would result from an increase in yield rate (j2) of 18 basis points. Round your answer to four decimal places.
Sarah just used $95.05 purchased a Treasury bond. Assume that the yield rate for this bond is j2 =3.61% p.a. and the duration of this bond is 2.74 years. Without actually calculating the new price for this bond, use the bond price and the duration value to estimate (use the price sensitivity formula) the change in price of this bond that would result from an increase in yield rate (j2) of 18 basis points. Round your answer to four decimal places.
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:Sarah just used $95.05 purchased a
Treasury bond. Assume that the yield rate
for this bond is j2 =3.61% p.a. and the
duration of this bond is 2.74 years. Without
actually calculating the new price for this
bond, use the bond price and the duration
value to estimate (use the price sensitivity
formula) the change in price of this bond
that would result from an increase in yield
rate (j2) of 18 basis points. Round your
answer to four decimal places.
a. -0.4605 b. -0.4525 c. -0.2262 d. -0.2302
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