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a) For the bond with a coupon of 5.5% paid annually, with 10 years to maturity...

a) For the bond with a coupon of 5.5% paid annually, with 10 years to maturity and a YTM of 6.10, calculate the duration and modified duration. b) For the bond described in a) above, calculate the convexity. c) Calculate the price change for a 50 basis point drop in yield using duration plus convexity. (5 points) d) Samantha and Roberta are discussing the riskiness of two treasury bonds A& B with the following features: Bond Price Modified Duration A 90 4 B 50 6 Samantha claims that Bond B has more price volatility because of its higher modified duration. Roberta disagrees and claims that Bond A has more price volatility despite its lower modified duration. Who is right? (5 points)

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Answer #1

Answer of question 1 has been answered :

Duration of the bond is 7.86 years

Modified Duration is 7.81

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