Home / Questions / Find the Macaulay duration and the modified duration of a 20year 95 % corporate bond pric...
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%.
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