The duration of a 20-year, 8 percent coupon Treasury bond selling at par is 10.34 years. The bond’s interest is paid semiannually, and the bond qualifies for delivery against the Treasury bond futures contract. What is the modified duration of this bond? What is the impact on the Treasury bond price if market interest rates increase 50 bps?
The duration of a 20-year, 8 percent coupon Treasury bond selling at par is 10.34 years. The bond’s interest is paid semiannually, and the bond qualifies for delivery against the Treasury bond futures contract. What is the modified duration of this bond? What is the impact on the Treasury bond price if market interest rates increase 50 bps?
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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The duration of a 20-year, 8 percent coupon Treasury bond selling at par is 10.34 years. The bond’s interest is paid semiannually, and the bond qualifies for delivery against the Treasury bond futures contract.
- What is the modified duration of this bond?
- What is the impact on the Treasury
bond price if market interest rates increase 50 bps?
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