Assume that A six-year bond with a yield of 10% (continuously compounded) pays an 8% coupon at the end of each year. (a) What is the bond’s price? (b) What is the bond’s duration? What is the bond’s modified duration? (c) Use the duration to calculate the effect on the bond’s price of a 0.15% decrease in its yield.

Assume that A six-year bond with a yield of 10% (continuously compounded) pays an 8% coupon at the end of each year. (a) What is the bond’s price? (b) What is the bond’s duration? What is the bond’s modified duration? (c) Use the duration to calculate the effect on the bond’s price of a 0.15% decrease in its yield.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 14P: Current Yield with Semiannual Payments A bond that matures in 7 years sells for $1,020. The bond has...

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