The table below shows the time to maturity for 3 bonds, a 2-year, 3-year, and 5-year. Each annual coupon bond has a yield to maturity of 3.86% and a coupon rate of 3.99%. Estimate the percent change in bonds price to a percent change in one plus the Interest rate, assuming a 10 basis point change in the Interest rates. Maturity 2-year Bond 3-year Bond 5-year Bond Approximate Elasticity 1.89 -2.77 -4.45

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
icon
Related questions
Question
The table below shows the time to maturity for 3 bonds, a 2-year, 3-year, and 5-year. Each annual coupon bond has a
yield to maturity of 3.86% and a coupon rate of 3.99%.
Estimate the percent change in bonds price to a percent change in one plus the Interest rate, assuming a 10 basis point
change in the Interest rates.
Maturity
2-year Bond
3-year Bond
5-year Bond
Approximate Elasticity
1.89
-2.77
-4.45
Transcribed Image Text:The table below shows the time to maturity for 3 bonds, a 2-year, 3-year, and 5-year. Each annual coupon bond has a yield to maturity of 3.86% and a coupon rate of 3.99%. Estimate the percent change in bonds price to a percent change in one plus the Interest rate, assuming a 10 basis point change in the Interest rates. Maturity 2-year Bond 3-year Bond 5-year Bond Approximate Elasticity 1.89 -2.77 -4.45
Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education