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The price of a bond declined from $925 to $900 when the yield to maturity rose from 2.25% to 4.25%. What is the modified duration? 2.00 O 1.54 1.35 O 1.20 O 1.00

The price of a bond declined from $925 to $900 when the yield to maturity rose from 2.25% to 4.25%. What is the modified duration? 2.00 O 1.54 1.35 O 1.20 O 1.00

Essentials Of Investments
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
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Question 23 The price of a bond declined from $925 to $900 when the yield to maturity rose from 2.25% to 4.25%. What is the modified duration? O 2.00 O 1.54 O 1.35 O 1.20 O 1.00
Transcribed Image Text:Question 23 The price of a bond declined from $925 to $900 when the yield to maturity rose from 2.25% to 4.25%. What is the modified duration? O 2.00 O 1.54 O 1.35 O 1.20 O 1.00
Do Question 22 Rank XYZ ha the illwg kvie hlance sheet tenpeed s of doll Assets Liabilities 5-year Short-term Loans 750 950 CDs Net Long-term Loans 250 50 Worth The short-tems loans are zero coupon and repaid at the end of 1 year. The Long-term loans are zero coupon loans that mature in 5 years. On the liability side, the 5-year CDs are also zero coupon. Assume that the yield curve is flat and interest rates are 10% today. Suppose you want to duration hedge the bank's equity by buying a 6-year Treasury STRIP financed with overnight borrowing in the interbank market. How would you hedge against a 1% increase in interest rates using STRIPS? O Short 458 million O Long 458 million O Long 500 million O Short 500 million O Long 550 million
Transcribed Image Text:Do Question 22 Rank XYZ ha the illwg kvie hlance sheet tenpeed s of doll Assets Liabilities 5-year Short-term Loans 750 950 CDs Net Long-term Loans 250 50 Worth The short-tems loans are zero coupon and repaid at the end of 1 year. The Long-term loans are zero coupon loans that mature in 5 years. On the liability side, the 5-year CDs are also zero coupon. Assume that the yield curve is flat and interest rates are 10% today. Suppose you want to duration hedge the bank's equity by buying a 6-year Treasury STRIP financed with overnight borrowing in the interbank market. How would you hedge against a 1% increase in interest rates using STRIPS? O Short 458 million O Long 458 million O Long 500 million O Short 500 million O Long 550 million
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