ESS. OF INVESTMENTS - ETEXT ACCESS CARD
ESS. OF INVESTMENTS - ETEXT ACCESS CARD
11th Edition
ISBN: 9781265909055
Author: Bodie
Publisher: MCG
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Chapter 11, Problem 21PS
Summary Introduction

To Discuss:

The duration of a bond with settlement date May 27,2018and a maturity date November 15,2027 if the coupons are paid annually. Also, explain the reason for which the duration changes in the direction it does.

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.

A zero-coupon bond is a bond where the face value is repaid at the time of maturity.

Yield to maturity is termed as the discount rate which makes the present payments from the bond and its price as equal, in simple terms it is the average rate of return a holder can expect from that bond.

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