A 10-year semiannual payment bond with a par value of 1000, Ask an Expert

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A 10-year, semiannual payment bond with a par value of $1,000 has a 7% coupon annual rate. Currently, this bond is a par bond on the market. Use the above information to answer the following questions.

a)What is the duration of this par bond?

b) If the Federal Reserve announces a Quantitative Easing and, therefore, pushing interest rates to unexpectedly fall. This bond's yield to maturity falls by 1%. What is the new duration?

c) Use the information in duration calculated in b) to calculate the bond price volatility

d) According to the above, what can you conclude about the relation between yield to maturity and interest rate risk?

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M9909574

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