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1) A bond has the 7.5% annual coupon rate with 4 years to maturity and pays annual coupon

i) What is the price of the bond if the yield to maturity is 5%

ii) What is price of the bond if the yield to maturity increases by 0.2%?

iii) What is the % change in the price of the bond when yield increases by 0.2%?

iv) What is the bond duration?

v) What is the modified duration?

vi) Using the modified duration, what is the percentage change in the price if the yield increases by 0.2%

vii) What can you conclude regarding the error estimate based on the modified duration?

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Be nice to have the steps on how to use it on a Texas Instrument BA II Plus

2) The First Bank of Ellicott City has issued continuous preferred stock with $100 par value. Bank pays the quarterly dividend of $1.65 on this stock. Determine the present price of this preferred stock given the necessary rate of return of 14.5 percent?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M914251

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