Create an Account

Already have account?

Forgot Your Password ?

Home / Questions / A 1000 7 annual coupon bond matures in three years The bond is currently priced at 974 23 ...

A 1000 7 annual coupon bond matures in three years The bond is currently priced at 974 23 and has a YTM of 80 a What is the Macaulay duration b Calculate the modified duration and use

A $1,000, 7% annual coupon bond matures in three years. The bond is currently priced at $974.23 and has a YTM of 8.0%.

(a) What is the Macaulay duration?

(b) Calculate the modified duration and use this to estimate the price change if interest rates dropped by 0.5%.

(c) Calculate the price of the bond if the rates do drop to 7.5%. How does this price change compare to that predicted by the modified duration? Explain the difference.

Aug 30 2020 View more View Less

Answer (Solved)

question Subscribe To Get Solution

Related Questions