Financial Institutions/Money Project - Duration

Part 1: Duration and Coupon Interest

Consider a five-year $1,000 face value, Treasury bond with a 10 yield to maturity selling at par. 

A) Calculate the duration if the semiannual coupon is 10%.

B) Calculate the duration if the semiannual coupon is 12%.

C) Calculate the duration if the semiannual coupon is 14%.

D) Plot the relationship between coupon interest rate (x-axis) and the duration (y-axis). Be sure to label the y-axis, x-axis, and chart title.

In your report, identify and comment on the relationship between duration and coupon interest rate.

Part 2: Duration and Rate of Return

Consider a five-year $1,000 face value, Treasury bond with a 10 percent semiannual coupon selling at par. 

E) Calculate the duration if the yield to maturity is 10%.

F) Calculate the duration if the yield to maturity is 12%.

G) Calculate the duration if the yield to maturity is 14%.

H) Plot the relationship between yield to maturity (x-axis) and the duration (y-axis). Be sure to label the y-axis, x-axis, and chart title.

In your report, identify and comment on the relationship between duration and yield to maturity.

Part 3: Duration and Maturity

Consider a $1,000 face value, Treasury bond with a 10 percent semiannual coupon selling at par with a 10 percent yield to maturity. 

I) Calculate the duration if the maturity is in five years.

J) Calculate the duration if the maturity is in four years.

K) Calculate the duration if the maturity is in three years.  

L) Plot the relationship between maturity (x-axis) and the duration (y-axis). Be sure to label the y-axis, x-axis, and chart title.

In your report, identify and comment on the relationship between duration and maturity.

Attachment:- Assignment.rar