Question

A 10 year annual coupon bond has a modified duration of 7.876 years based on its...

A 10 year annual coupon bond has a modified duration of 7.876 years based on its 4% annual effective yield to maturity. The bonds redemption value is the same as its face value of $1000. if the bonds annual coupon rate were increased by 1% what would be the new purchase price assuming the same old rate of 4%
Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

here we have firstly find coupon rate using yield to maturity given and then use the same to find the price of the bond using the formula

Present value of all the coupon rate and the redemption price at the ends of 10year .

We have not used modified duration here but we can also find coupon rate from there MD= Duration/ 1+ytm

Duration =(CY/ytm)*annuity(ytm)* (1+ytm)+(1-CY/ytm)*n

Current yield = coupon rate / market price

Hence involve complications hence we have used YTm for finding coupon rate.

Plss reply whether the answer is correct or not.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A bond has a 25-year maturity, 10% coupon, 10% yields, $1000 face value, a duration of...
A bond has a 25-year maturity, 10% coupon, 10% yields, $1000 face value, a duration of 10 years and a convexity if 135.5. Calculate the new value of the bond (in $), based on modified duration and convexity, if interest rates were to fall by 125 basis points.
A bond has a 25-year maturity, 10% coupon, 10% yields, $1000 face value, a duration of...
A bond has a 25-year maturity, 10% coupon, 10% yields, $1000 face value, a duration of 10 years and a convexity if 135.5. Calculate the new value of the bond (in $), based on modified duration and convexity, if interest rates were to fall by 125 basis points. Please show the working/formulas if done in excel.
An Apple annual coupon bond has a coupon rate of 6.9%, face value of $1,000, and...
An Apple annual coupon bond has a coupon rate of 6.9%, face value of $1,000, and 4 years to maturity. If its yield to maturity is 6.9%, what is its Modified Duration? Answer in years, rounded to three decimal places.
A coupon bond pays annual interest, has a par value of $1,000, matures in 12 years,...
A coupon bond pays annual interest, has a par value of $1,000, matures in 12 years, has a coupon rate of 8%, and has a yield to maturity of 7%. 1) Calculate the price of the bond and the Current Yield. 2)   The Macaulay Duration for this bond is 8.29 years, then what is the Modified Duration? 3) Suppose you sell the bond at $1000 two years later. The reinvestment return during these two years is 6%. What is the...
A bond with a yield to maturity of 3% and a coupon rate of 3% has...
A bond with a yield to maturity of 3% and a coupon rate of 3% has 3 years remaining until maturity. Calculate the duration and the modified duration for this bond assuming annual interest payments and a par value of $1,000. Why is the duration of this bond higher than the 3-year 10% coupon bond yielding 10% we looked at in the notes that had a duration of 2.7 years? If the required market yield on this bond increases to...
a) First, consider a 10 year bond with a coupon rate of 7% and annual coupon...
a) First, consider a 10 year bond with a coupon rate of 7% and annual coupon payments. Draw a graph showing the relationship between the price and the interest on this bond. The price should be on the y- axis and the interest rate on the x-axis. To compute the various prices, consider interest rates between 2% and 12% (use 0.5% increments). So your x-axis should go from 2%, then 2.5% ... until 11.5% and then 12%. Is the relationship...
Find the duration of a 4% coupon bond making annual coupon payments if it has 3...
Find the duration of a 4% coupon bond making annual coupon payments if it has 3 years until maturity and has a yield to maturity of 4%. What is the duration if the yield to maturity is 6%? Note: The face value of the bond is $1,000. (Do not round intermediate calculations. Round your answers to 3 decimal places.) Duration 4% YTM: 6% YTM:
A bond pays annual interest. Its coupon rate is 9.6%. Its value at maturity is $1,000....
A bond pays annual interest. Its coupon rate is 9.6%. Its value at maturity is $1,000. It matures in 4 years. Its yield to maturity is currently 6.6%. The modified duration of this bond is ______ years.
A 30-year bond making annual payments has a coupon rate of 12%,a duration of 11.54years, and...
A 30-year bond making annual payments has a coupon rate of 12%,a duration of 11.54years, and convexity of 192.4.The bond is currently selling at a yield to maturity of 8%. Use the duration-with -convexity approximation to predict the new price of the bond iftheyield to maturitydeclines from 8% to 7%.Assume a facevalue of 1000.
A semi-annual coupon bond with 2 years to maturity and 8% per annum coupon rate has...
A semi-annual coupon bond with 2 years to maturity and 8% per annum coupon rate has a face value of $1,000 with a yield to maturity of 12% per annum (compounded semi-annually). Using the bond’s modified duration, estimate the new bond price when the yield to maturity immediately changes from 12% per annum to 8% per annum. Select one: a. 66.27 dollars.   b. 996.97 dollars. c. 930.70 dollars. d. 864.43 dollars. e. None of the statements is true.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT