Answered: 8. Consider a 10 year 6.50% annual…

8. Consider a 10 year 6.50% annual coupon bond whose duration is 7.50 years when required rate of return (yield to maturity) is 6.50%. Prove that this bond is immunized if you hold it for 7.50 years.

Microeconomics

13th Edition

ISBN:9781337617406

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter16: Interest, Rent, And Profit

Section: Chapter Questions

Problem 1WNG

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Question

8. Consider a 10 year 6.50% annual coupon
bond whose duration is 7.50 years when
required rate of return (yield to maturity)
is 6.50%. Prove that this bond is
immunized if you hold it for 7.50 years.

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