Submit your solutions as an Excel document. Be sure to clearly label the various parts of the problem. 1. Consider the following two bonds that make semi- annual coupon payments. Assume the first coupon payment occurs in exactly six months, and the bond has a face value of $1000 Coupon Rate Time to Maturity YTM Bond A 3.80 % 8 years 3.6% Bond B 3.80% 18 years 4.2% d.) Use a spreadsheet to compute the annualized Macaulay duration and modified duration for Bond A at a yield to maturity of 3.6% Provide an interpretation of the modified duration with regards to maturity and interest rate risk. e.) Use a spreadsheet to calculate the annualized convexity measure of Bond A at a YTM of 3.696. f.) Using the duration approximation formula with a convexity adjustment. what percentage change in the price of Bond A would you expect if the yield decreases by 150 ?
Submit your solutions as an Excel document. Be sure to clearly label the various parts of the problem. 1. Consider the following two bonds that make semi- annual coupon payments. Assume the first coupon payment occurs in exactly six months, and the bond has a face value of $1000 Coupon Rate Time to Maturity YTM Bond A 3.80 % 8 years 3.6% Bond B 3.80% 18 years 4.2% d.) Use a spreadsheet to compute the annualized Macaulay duration and modified duration for Bond A at a yield to maturity of 3.6% Provide an interpretation of the modified duration with regards to maturity and interest rate risk. e.) Use a spreadsheet to calculate the annualized convexity measure of Bond A at a YTM of 3.696. f.) Using the duration approximation formula with a convexity adjustment. what percentage change in the price of Bond A would you expect if the yield decreases by 150 ?
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