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Find the Macaulay duration and the modified duration of a 20year 95 % corporate bond priced to yield 75% According to the modified duration of this bond how much of a price change would this

Find the Macaulay duration and the modified duration of a? 20-year,

9.5?% corporate bond priced to yield 7.5%.According to the modified duration of this? bond, how much of a price change would this bond incur if market yields rose to

8.5?%? Using annual? compounding, calculate the price of this bond in 1 year if rates do rise to

8.5%. How does this price change compare to that predicted by the modified? duration? Explain the difference

The Macaulay duration is

nothing

.

?(Round to two decimal? places.)

The modified duration is

nothing

.

?(Round to two decimal? places.)

If market yields rose to

8.5

?%,

the change would be

nothing

?%.

?(Round to two decimal? places.)

Using annual? compounding, the price of this bond in 1 year if rates do rise to

8.5

?%

is

?\$nothing

.

?(Round to two decimal? places.)

The actual percentage change in bond price is

nothing

?%.

?(Round to two decimal? places.)

Which of the following is? true? ?(Select the best answer? below.)

A.

Duration is not a good predictor of price volatility if interest rates undergo a big swing because of the convex relationship of a? bond's price-yield relationship.

B.

Duration is not a good predictor of price volatility if rates change more than a basis point.

C.

Duration is a good predictor of price volality because of the convex relationship of a? bond's price-yield relationship.

D.

Duration is a good predictor of price volatility if rates change less than? 2%.

Apr 07 2020 View more View Less