Answered: a) the price of each bond b) the…

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter6: Bonds (debt) - Characteristics And Valuation

Section: Chapter Questions

Problem 15PROB

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Assignment Three (B)
A five-year bond is issued with a face value of GHC3000.The bond pays coupon semiannually
at 10%. The yield to maturity is 8%. Another five-year bond with the same face value is
provides a coupon of 15% but the yield to maturity is 12.5%. You are required to calculate
a) the price of each bond
b) the duration of each bond
c) the convexity of each bond
d) If interest rate increases by 500 basis points, calculate and identify which bond will
experience a higher change in price in terms of percentage and absolute amount.

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