A bond of $1000 was issued five years ago at a coupon rate of 6%. The bond had a maturity period of 10 years to be redeemable at par. The market interest rate currently is 10%. a. Determine the value of the bond. b. Calculate the Modified Duration. c. Calculate the expected price change if tomorrow interest rates increases from 10% to 11.5% d. Calculate the expected price change if next year the interest rates will increase from 10% to 12%
A bond of $1000 was issued five years ago at a coupon rate of 6%. The bond had a maturity period of 10 years to be redeemable at par. The market interest rate currently is 10%. a. Determine the value of the bond. b. Calculate the Modified Duration. c. Calculate the expected price change if tomorrow interest rates increases from 10% to 11.5% d. Calculate the expected price change if next year the interest rates will increase from 10% to 12%
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
10th Edition
ISBN:9781337902571
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter7: Bonds And Their Valuation
Section: Chapter Questions
Problem 1P
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