ESSEN OF INVESTMENTS CONNECT AC
ESSEN OF INVESTMENTS CONNECT AC
11th Edition
ISBN: 9781266650314
Author: Bodie
Publisher: MCG
Question
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Chapter 11, Problem 1CP
Summary Introduction

To Discuss:

To rank the following bonds in order of descending duration:

    Bond Coupon(%) Time to Maturity(Years) Yield to Maturity(%)
    A
    15
    20
    10
    B
    15
    15
    10
    C
    0
    20
    10
    D
    8
    20
    10
    E
    15
    15
    15

Introduction:

A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time. The face value of the bond is the amount the holder will receive on maturity along with the coupon rate which is also known as the interest rate of the bond. Yield to maturity is defined as the discount rate that makes the present payments from the bond equal to its price. In simple terms, it is the average rate of return a holder can expect from that bond.

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