Application of durationmiddot draw the price-ytmi graph for, Ask an Expert

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Application of duration

· Draw the price-ytm(i) graph for a 5% fixed-coupon bond that has 10 years to maturity (assuming annual coupon payments).

· Calculate the duration for this bond if the interest rate is 3%.

· What is the approximate percentage change in price if the interest rate rises to 5%? (calculate the price change using the duration approach)

· What is the actual percentage change in price if the interest rate rises to 5%?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91731708

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