Suppose the yield to maturity on an 65 coupon bond with 17, Ask an Expert

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Suppose the yield to maturity on an 6.5% coupon bond with 17 years to maturity is 7%. What is this bond’s Macaulay duration? Its modified duration?

Now suppose the yield to maturity on the bond in the previous problem increases by 0.25 percent. What is the new price of the bond using duration? What is the new price of the bond using the bond pricing formula? What if the yield to maturity increases by 1 percent? By 2 percent? By 5 percent? What does this tell you about using duration to estimate bond price changes for large interest rate changes?

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Financial Management, Finance

Category:- Financial Management
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