The modified duration of the bond, based on the given information. Introduction: Using modified duration, we can measure the sensitivity involved in the bond price with respect to the changes in the yield to maturity of the bond.

Question

Want to see the full answer?

Answer 1

Question

Chapter 16, Problem 3CP

A.

Summary Introduction

To calculate: The modified duration of the bond, based on the given information.

Introduction: Using modified duration, we can measure the sensitivity involved in the bond price with respect to the changes in the yield to maturity of the bond.

B.

Summary Introduction

To Determine: The reasons supporting the measure of modified duration being better than the maturity in finding out the sensitivity of a bond with respect to the changes in interest rates.

Introduction: Using modified duration, we can measure the sensitivity involved in the bond price with respect to the changes in the yield to maturity of the bond.

C.

Summary Introduction

To Determine: Comment on the changes in modified duration and maturity, with respect to the given information.

Introduction: Using modified duration, we can measure the sensitivity involved in the bond price with respect to the changes in the yield to maturity of the bond.

D.

Summary Introduction

To Determine: The convexity and what is the use of it and modified duration in determining the percentage change in price of the bond, with respect to the changes in its interest rates.

Introduction: Convexity helps in expressing the changes in the duration of the bond, with respect to the changes in the interest rates.

Using modified duration, we can measure the sensitivity involved in the bond price with respect to the changes in the yield to maturity of the bond.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

The rate of return on a bond held to its maturity date is called the bond’syield to maturity. If interest rates in the economy rise after a bond hasbeen issued, what will happen to the bond’s price and to its YTM? Doesthe length of time to maturity affect the extent to which a given change ininterest rates will affect the bond’s price? Why or why not?

The forward rate f(t1,12) of a bond, is the implicit interest rate in a future period between time t1 and t2. For example, assuming continuous time returns, if the discount rate from period 0 to t1 is: exp(-r t1), and from period 0 to 12 (greater than t1) is: exp(-r t2), then the forward rate f from t1 to t2 maintains the following no arbitrage relationship: exp(-r t1) exp(-f (t2-t1) exp(-r t2)). Suppose we observe the prices of a 14-year zero-coupon bond (with a face value of $93.31), where P(t1,t2) regans the price of the bond between t1 and 12, and a year 7-to-14 forward rate as follows:P(0.14) - $86.5496905000 and f(7,14) - 0.6074704253 %. Calculate the price of a 7-year zero-coupon, with face value $99.27: $82.9604 $96.0778 ✓(25 %) $96.2349 $82.1804

Can the price of bond B be determined using the PV function or any other function in excel? What is the EAR (effective annual rate) of these two bonds?

Answer 2

Question

Chapter 16, Problem 3CP

A.

Summary Introduction

To calculate: The modified duration of the bond, based on the given information.

Introduction: Using modified duration, we can measure the sensitivity involved in the bond price with respect to the changes in the yield to maturity of the bond.

B.

Summary Introduction

To Determine: The reasons supporting the measure of modified duration being better than the maturity in finding out the sensitivity of a bond with respect to the changes in interest rates.

Introduction: Using modified duration, we can measure the sensitivity involved in the bond price with respect to the changes in the yield to maturity of the bond.

C.

Summary Introduction

To Determine: Comment on the changes in modified duration and maturity, with respect to the given information.

Introduction: Using modified duration, we can measure the sensitivity involved in the bond price with respect to the changes in the yield to maturity of the bond.

D.

Summary Introduction

To Determine: The convexity and what is the use of it and modified duration in determining the percentage change in price of the bond, with respect to the changes in its interest rates.

Introduction: Convexity helps in expressing the changes in the duration of the bond, with respect to the changes in the interest rates.

Using modified duration, we can measure the sensitivity involved in the bond price with respect to the changes in the yield to maturity of the bond.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 3

Question

Chapter 16, Problem 3CP

A.

Summary Introduction

To calculate: The modified duration of the bond, based on the given information.

Introduction: Using modified duration, we can measure the sensitivity involved in the bond price with respect to the changes in the yield to maturity of the bond.

B.

Summary Introduction

To Determine: The reasons supporting the measure of modified duration being better than the maturity in finding out the sensitivity of a bond with respect to the changes in interest rates.

Introduction: Using modified duration, we can measure the sensitivity involved in the bond price with respect to the changes in the yield to maturity of the bond.

C.

Summary Introduction

To Determine: Comment on the changes in modified duration and maturity, with respect to the given information.

Introduction: Using modified duration, we can measure the sensitivity involved in the bond price with respect to the changes in the yield to maturity of the bond.

D.

Summary Introduction

To Determine: The convexity and what is the use of it and modified duration in determining the percentage change in price of the bond, with respect to the changes in its interest rates.

Introduction: Convexity helps in expressing the changes in the duration of the bond, with respect to the changes in the interest rates.

Using modified duration, we can measure the sensitivity involved in the bond price with respect to the changes in the yield to maturity of the bond.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 16, Problem 3CP

A.

Summary Introduction

To calculate: The modified duration of the bond, based on the given information.

Introduction: Using modified duration, we can measure the sensitivity involved in the bond price with respect to the changes in the yield to maturity of the bond.

B.

Summary Introduction

To Determine: The reasons supporting the measure of modified duration being better than the maturity in finding out the sensitivity of a bond with respect to the changes in interest rates.

Introduction: Using modified duration, we can measure the sensitivity involved in the bond price with respect to the changes in the yield to maturity of the bond.

C.

Summary Introduction

To Determine: Comment on the changes in modified duration and maturity, with respect to the given information.

Introduction: Using modified duration, we can measure the sensitivity involved in the bond price with respect to the changes in the yield to maturity of the bond.

D.

Summary Introduction

To Determine: The convexity and what is the use of it and modified duration in determining the percentage change in price of the bond, with respect to the changes in its interest rates.

Introduction: Convexity helps in expressing the changes in the duration of the bond, with respect to the changes in the interest rates.

Using modified duration, we can measure the sensitivity involved in the bond price with respect to the changes in the yield to maturity of the bond.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 5

Chapter 16, Problem 3CP

A.

Summary Introduction

To calculate: The modified duration of the bond, based on the given information.

Introduction: Using modified duration, we can measure the sensitivity involved in the bond price with respect to the changes in the yield to maturity of the bond.

B.

Summary Introduction

To Determine: The reasons supporting the measure of modified duration being better than the maturity in finding out the sensitivity of a bond with respect to the changes in interest rates.

Introduction: Using modified duration, we can measure the sensitivity involved in the bond price with respect to the changes in the yield to maturity of the bond.

C.

Summary Introduction

To Determine: Comment on the changes in modified duration and maturity, with respect to the given information.

Introduction: Using modified duration, we can measure the sensitivity involved in the bond price with respect to the changes in the yield to maturity of the bond.

D.

Summary Introduction

To Determine: The convexity and what is the use of it and modified duration in determining the percentage change in price of the bond, with respect to the changes in its interest rates.

Introduction: Convexity helps in expressing the changes in the duration of the bond, with respect to the changes in the interest rates.

Using modified duration, we can measure the sensitivity involved in the bond price with respect to the changes in the yield to maturity of the bond.

Answer 6

Chapter 16, Problem 3CP

A.

Summary Introduction

To calculate: The modified duration of the bond, based on the given information.

Introduction: Using modified duration, we can measure the sensitivity involved in the bond price with respect to the changes in the yield to maturity of the bond.

Answer 7

Chapter 16, Problem 3CP

A.

Summary Introduction

To calculate: The modified duration of the bond, based on the given information.

Introduction: Using modified duration, we can measure the sensitivity involved in the bond price with respect to the changes in the yield to maturity of the bond.

Answer 8

B.

Summary Introduction

To Determine: The reasons supporting the measure of modified duration being better than the maturity in finding out the sensitivity of a bond with respect to the changes in interest rates.

Introduction: Using modified duration, we can measure the sensitivity involved in the bond price with respect to the changes in the yield to maturity of the bond.

Answer 9

B.

Summary Introduction

To Determine: The reasons supporting the measure of modified duration being better than the maturity in finding out the sensitivity of a bond with respect to the changes in interest rates.

Introduction: Using modified duration, we can measure the sensitivity involved in the bond price with respect to the changes in the yield to maturity of the bond.

Answer 10

C.

Summary Introduction

To Determine: Comment on the changes in modified duration and maturity, with respect to the given information.

Introduction: Using modified duration, we can measure the sensitivity involved in the bond price with respect to the changes in the yield to maturity of the bond.

Answer 11

C.

Summary Introduction

To Determine: Comment on the changes in modified duration and maturity, with respect to the given information.

Introduction: Using modified duration, we can measure the sensitivity involved in the bond price with respect to the changes in the yield to maturity of the bond.

Answer 12

D.

Summary Introduction

To Determine: The convexity and what is the use of it and modified duration in determining the percentage change in price of the bond, with respect to the changes in its interest rates.

Introduction: Convexity helps in expressing the changes in the duration of the bond, with respect to the changes in the interest rates.

Using modified duration, we can measure the sensitivity involved in the bond price with respect to the changes in the yield to maturity of the bond.

Answer 13

D.

Summary Introduction

To Determine: The convexity and what is the use of it and modified duration in determining the percentage change in price of the bond, with respect to the changes in its interest rates.

Introduction: Convexity helps in expressing the changes in the duration of the bond, with respect to the changes in the interest rates.

Using modified duration, we can measure the sensitivity involved in the bond price with respect to the changes in the yield to maturity of the bond.

Answer 14

Expert Solution & Answer

Answer 15

Expert Solution & Answer

Answer 16

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 17

Ch. 16 - Prob. 1PS Ch. 16 - Prob. 2PS Ch. 16 - Prob. 3PS Ch. 16 - Prob. 4PS Ch. 16 - Prob. 5PS Ch. 16 - Prob. 6PS Ch. 16 - Prob. 7PS Ch. 16 - Prob. 8PS Ch. 16 - Prob. 9PS Ch. 16 - Prob. 10PS

The modified duration of the bond, based on the given information. Introduction: Using modified duration, we can measure the sensitivity involved in the bond price with respect to the changes in the yield to maturity of the bond.

Solution Summary: The author calculates the modified duration of the bond, based on the given information. Modified Duration is a better measure of sensitivity than the maturity.

Concept explainers

Videos

To calculate: The modified duration of the bond, based on the given information.

Introduction: Using modified duration, we can measure the sensitivity involved in the bond price with respect to the changes in the yield to maturity of the bond.

To Determine: Comment on the changes in modified duration and maturity, with respect to the given information.

Introduction: Using modified duration, we can measure the sensitivity involved in the bond price with respect to the changes in the yield to maturity of the bond.

Want to see the full answer?

Chapter 16 Solutions

The modified duration of the bond, based on the given information. Introduction: Using modified duration, we can measure the sensitivity involved in the bond price with respect to the changes in the yield to maturity of the bond.

Solution Summary: The author calculates the modified duration of the bond, based on the given information. Modified Duration is a better measure of sensitivity than the maturity.

Concept explainers

Videos

To calculate: The modified duration of the bond, based on the given information. Introduction: Using modified duration, we can measure the sensitivity involved in the bond price with respect to the changes in the yield to maturity of the bond.

To Determine: Comment on the changes in modified duration and maturity, with respect to the given information. Introduction: Using modified duration, we can measure the sensitivity involved in the bond price with respect to the changes in the yield to maturity of the bond.

Want to see the full answer?

Chapter 16 Solutions

To calculate: The modified duration of the bond, based on the given information.

Introduction: Using modified duration, we can measure the sensitivity involved in the bond price with respect to the changes in the yield to maturity of the bond.

To Determine: Comment on the changes in modified duration and maturity, with respect to the given information.

Introduction: Using modified duration, we can measure the sensitivity involved in the bond price with respect to the changes in the yield to maturity of the bond.