Use the following information for the questions. Assume 4-year annual coupon bond with coupon interest rate = 8%. Yield to maturity =8% and face value =1000 $. 6-1) Calculate intrinsic value of this bond. A> $1000 t CF PV factor PV(CF) 1 80.0000 0.9259 74.0740 2 80.0000 0.7938 68.5871 3 4 80.0000 1080.0000 0.7350 63.5071 793.8841 value 1000. 6-2) Explain the concept of modified duration and calculate it for the above bond.
Use the following information for the questions. Assume 4-year annual coupon bond with coupon interest rate = 8%. Yield to maturity =8% and face value =1000 $. 6-1) Calculate intrinsic value of this bond. A> $1000 t CF PV factor PV(CF) 1 80.0000 0.9259 74.0740 2 80.0000 0.7938 68.5871 3 4 80.0000 1080.0000 0.7350 63.5071 793.8841 value 1000. 6-2) Explain the concept of modified duration and calculate it for the above bond.
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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Use the following information for the questions. Assume 4-year annual coupon bond with coupon interest rate = 8%. Yield to maturity =8% and face value =1000 $.
6-1) Calculate intrinsic value of this bond.
A> $1000
t |
CF |
PV factor |
PV(CF) |
1 |
80.0000 |
0.9259 |
74.0740 |
2 |
80.0000 |
0.7938 |
68.5871 |
3
4 |
80.0000
1080.0000 |
0.7350 |
63.5071
793.8841 |
value |
|
|
1000. |
6-2) Explain the concept of modified duration and calculate it for the above bond.
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