Question

The
current YTM of a semi annual bond with a 6.2 year duration is 9.2%.
Calculate the percentage rate of change in the price of the bond if
the YTM increases by 80 basis points.

Answer #1

First, we need to compute the modified duration -

Modified duration = Duration / (1 + YTM) = 6.2 / (1 + 0.092) = 5.6776557

Modified duration denotes the percentage change in bond price for every 1 percentage change in YTM. So, when YTM changes by 1%, bond price changes by 5.6776557%.

Now, if YTM increases, bond price will decrease since they have an inverse relationship.

Therefore, if YTM increases by 80 basis points or 0.80%, then
*decrease* in bond price = (-)5.6776557% x 0.80 =
(-)4.54212% or **(-)4.54%**

A 25-year semiannual bond has 10% coupon rate and par value
$1,000. The current YTM of the bond is 10%. Its Macaulay duration
is 9.58 years and convexity is 141.03.
(1) What is the bond’s modified duration? (2 points)
(2) What is the percentage price change if interest rate were to
fall 125 basis points considering both duration and convexity? (4
points)
(3) What is the estimated price with 125 basis points decrease
in yield? (4 points)

Calculate the current value of a 7-year, 6.4%, annual bond whose
YTM is 8.4%. Then calculate the current value again but assume its
a semi annual bond. Which one would be more valuable?

You have a 25-year maturity, 10.4% coupon paid semi-annually,
10.4% YTM bond with a duration of 10 years and a convexity of
113.9976. If the interest rate were to fall 129 bps:
a) Show the total change in the bond price, Δ B, as a result of
the decline in yields.
b) Show the bond price change due to duration, Bd.
c) Show the bond price change due to convexity, Bc.
d) Verify the accuracy of your responses by showing:...

A five-year bond pays annual coupon payments of 10%. The face
value of the bond is $1,000 and has a current market price of
$1,079.85. The current yield to maturity is 8%. (15m) Calculate the
Duration (D) of this bond by completing the table below. Show all
working. Suppose that the interest rates increased by 75 basis
points as of today. Calculate the percentage and dollar amount
change in the price of the bond. Calculate the new price of the...

Price the following:
12-year, $1000 par value, 6% semi-annual coupon bond whose
current nominal yield-to-maturity (YTM) is 8%.
10-year, $1000 par value, 8% quarterly coupon bond whose current
nominal YTM is 7%.
30-year, $1000 par value, zero-coupon bond whose current nominal
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13-year, $1000 par value, 8% monthly coupon bond whose current
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5-year, $500 par value, 8% semi-annual coupon bond whose current
nominal YTM is 8.25%

Bond C is a 2-year bond with a coupon rate of 4%. Interest is
paid semi-annually. Market interest rates have now increased by 80
basis points. Calculate the bond's duration using annual data but
with the price calculated earlier ($984.92)
Question options:
1)
2.00 years (THIS OPTION IS WRONG)
2)
1.52 years
3)
1.96 years
4)
1.87 years
OPTION 1 IS WRONG

The following two (2) questions are based on the following
semi-annual coupon payment bonds:
Bond X
Bond Y
N (semi-annual)
10
12
Rd (semi-annual)
3.5%
3.5%
PMT (semi-annual)
35
35
PV
-1000
-1000
FV
1000
1000
1.
If interests rates rise 1.25% on an annual basis, what will be
the change in value of price due to duration for Bond
X? Include a negative (-) sign if the price change is a
decline. For example, enter -123.45 for a $123.45 price...

A nine-year bond has a yield of 10% and a duration of 7.213
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duration formula? (Input the value as a positive value. Do
not round intermediate calculations. Round your answer to 2 decimal
places.)
The bond's price increased by/ decreased by what
percentage?.

Calculate the duration of a two-year, $1,000 bond that pays an
annual coupon of 10 percent and trades at a yield of 14 percent.
What is the expected change in the price of the bond if interest
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A 5-year, $1,000 face bond with a 3% coupon is currently selling
with a 4% YTM (yield to maturity). What is the purchase price of
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Immediately after you purchase the bond, the reinvestment rate
in the market drops to 3%. What is your realized yield on your bond
investment?
What is the duration of the bond in
Question?
If market yields were to drop by 1%, what is the approximate
percentage change in price you would expect, based...

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