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A bond has a MD of 6.50 years and trades at a price of 118.08. The...

A bond has a MD of 6.50 years and trades at a price of 118.08. The YTM is 3.40%. Its CX factor is 50.68. Using MD and CX, what is the new price when the YTM increases to 5.1%?

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Answer #1

Change in Bond Price using Modified Duration and Convexity:

where,

P = Price of Bond

Y = Yield rate

Dm = Modified Durarion

Change in (delta)

Provided,

Dm = 6.50

P = 118.08

Convexity = 50.68

putting the values:

Thus, New Price of Bond:

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