INVESTMENTS(LL)W/CONNECT
11th Edition
ISBN: 9781260433920
Author: Bodie
Publisher: McGraw-Hill Publishing Co.
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Chapter 16, Problem 17PS
Summary Introduction
Adequate information
| Characteristic pertaining to fixed rate note and fixed rate bond | ||
| Price | Fixed Rate Bond | Fixed Rate Note |
| Price | 107.18 | 100 |
| YTM | 5% | 5% |
| Time remaining for maturity | 18 | 8 |
| Duration (Modified) | 6.9848 | 3.5851 |
To determine:
The most optimum strategy amongst the three, lengthen the portfolio duration, buy fixed rate bonds and shorten the portfolio duration.
Introduction:
Fixed rate bond is one of the kind of debt instrument which comprises of fixed interest (coupon) payment in comparison to floating rate bond. Fixed rate note is generally issued for a long period of time and has a predetermined rate of interest. Duration on the other hand, refers to the measure of price of bond sensitivity with respect to changes in the rate of interest.
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Chapter 16 Solutions
INVESTMENTS(LL)W/CONNECT
Ch. 16 - Prob. 1PSCh. 16 - Prob. 2PSCh. 16 - Prob. 3PSCh. 16 - Prob. 4PSCh. 16 - Prob. 5PSCh. 16 - Prob. 6PSCh. 16 - Prob. 7PSCh. 16 - Prob. 8PSCh. 16 - Prob. 9PSCh. 16 - Prob. 10PS
Ch. 16 - Prob. 11PSCh. 16 - Prob. 12PSCh. 16 - Prob. 13PSCh. 16 - Prob. 14PSCh. 16 - Prob. 15PSCh. 16 - Prob. 16PSCh. 16 - Prob. 17PSCh. 16 - Prob. 18PSCh. 16 - Prob. 19PSCh. 16 - Prob. 20PSCh. 16 - Prob. 21PSCh. 16 - Prob. 22PSCh. 16 - Prob. 23PSCh. 16 - Prob. 24PSCh. 16 - Prob. 25PSCh. 16 - Prob. 1CPCh. 16 - Prob. 2CPCh. 16 - Prob. 3CPCh. 16 - Prob. 4CPCh. 16 - Prob. 5CPCh. 16 - Prob. 6CPCh. 16 - Prob. 7CPCh. 16 - Prob. 8CPCh. 16 - Prob. 9CPCh. 16 - Prob. 10CPCh. 16 - Prob. 11CPCh. 16 - Prob. 12CPCh. 16 - Prob. 13CP
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