Suppose that there exist two bonds with the following characteristics: Bond А B Term to Maturity 3 уears 4 years Face Value £1,000 £1,000 Соupon Rate 2% 5% Yield to Maturity 10% 10% 2.1 How can the market prices of Bonds A and B be affected by a change of the yield to maturity from 10% to 5% (for both of them) and from 10% to 15% (for both of them)? 2.2 Discuss and evaluate your findings by also analysing the bond duration for Bond A and B.
Suppose that there exist two bonds with the following characteristics: Bond А B Term to Maturity 3 уears 4 years Face Value £1,000 £1,000 Соupon Rate 2% 5% Yield to Maturity 10% 10% 2.1 How can the market prices of Bonds A and B be affected by a change of the yield to maturity from 10% to 5% (for both of them) and from 10% to 15% (for both of them)? 2.2 Discuss and evaluate your findings by also analysing the bond duration for Bond A and B.
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:Suppose that there exist two bonds with the following characteristics:
Bond
A
B
Term to Maturity
3 уears
4 years
Face Value
£1,000
£1,000
Сoupon Rate
2%
5%
Yield to Maturity
10%
10%
2.1 How can the market prices of Bonds A and B be affected by a change of the yield to
maturity from 10% to 5% (for both of them) and from 10% to 15% (for both of them)?
2.2 Discuss and evaluate your findings by also analysing the bond duration for Bond A
and B.
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