You are holding a 2-year 10 annualized coupon bond with, Ask an Expert

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You are holding a 2-year 10% (annualized) coupon bond with face value $1,000 now. The interest rate now is 5% (semi-annual). However, the interest rate increases to 5.5% (semi annual) tomorrow. What is the Macaulay Duration now? What is the Modified Duration now? When the interest rate (semi-annual) increases to 5.5% tomorrow, what is the actual price change in this bond? And what is the bond price change using modified duration approximation? Which one is larger in absolute value?

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Financial Management, Finance

Category:- Financial Management
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