1. Consider a bond that has a coupon rate of 5 percent, five years remaining to maturity, and is priced to yield 4%. Assume semi-annual interest. a. What is the effective duration for this bond? b. What is the approximate change in price if the yield increases from 4% to 5%?

1. Consider a bond that has a coupon rate of 5 percent, five years remaining to maturity, and is priced to yield 4%. Assume semi-annual interest. a. What is the effective duration for this bond? b. What is the approximate change in price if the yield increases from 4% to 5%?

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter12: Investing In Stocks And Bonds

Section: Chapter Questions

Problem 6FPE

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1. Consider a bond that has a coupon rate of 5 percent, five years remaining to maturity,
and is priced to yield 4%. Assume semi-annual interest.
a. What is the effective duration for this bond?
b. What is the approximate change in price if the yield increases from 4% to 5%?

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