Homework Help is Here – Start Your Trial Now!
Business
Finance
Bond A has a price of 2,750 at an annual effective yield rate of 6%. The modified duration of the bond is 12. Bond B has a price of 2,000 at an annual effective yield rate of 6%. The modified duration of the bond is ModDB. If the annual yield rate drops by 2%, both estimated bond prices increase by the same dollar amount using the first-order Macaulay approximation. Calculate ModDB. A 13.5 B 14.2 C 15.8 D 16.5 E 18.1

Bond A has a price of 2,750 at an annual effective yield rate of 6%. The modified duration of the bond is 12. Bond B has a price of 2,000 at an annual effective yield rate of 6%. The modified duration of the bond is ModDB. If the annual yield rate drops by 2%, both estimated bond prices increase by the same dollar amount using the first-order Macaulay approximation. Calculate ModDB. A 13.5 B 14.2 C 15.8 D 16.5 E 18.1

Intermediate Financial Management (MindTap Course List)
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 12P: Bond Yields and Rates of Return A 10-year, 12% semiannual coupon bond with a par value of 1,000 may...
See similar textbooks
icon
Related questions
Question

Am. 111.

Bond A has a price of 2,750 at an annual effective yield rate of 6%. The modified duration of the bond is 12. Bond B has a price of 2,000 at an annual effective yield rate of 6%. The modified duration of the bond is ModDB. If the annual yield rate drops by 2%, both estimated bond prices increase by the same dollar amount using the first-order Macaulay approximation. Calculate ModDB. A 13.5 B 14.2 C 15.8 D 16.5 E 18.1
Transcribed Image Text:Bond A has a price of 2,750 at an annual effective yield rate of 6%. The modified duration of the bond is 12. Bond B has a price of 2,000 at an annual effective yield rate of 6%. The modified duration of the bond is ModDB. If the annual yield rate drops by 2%, both estimated bond prices increase by the same dollar amount using the first-order Macaulay approximation. Calculate ModDB. A 13.5 B 14.2 C 15.8 D 16.5 E 18.1
Expert Solution
steps

Step by step

Solved in 2 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Recommended textbooks for you
Intermediate Financial Management (MindTap Course…
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
Financial Accounting: The Impact on Decision Make…
Financial Accounting: The Impact on Decision Make…
Accounting
ISBN:
9781305654174
Author:
Gary A. Porter, Curtis L. Norton
Publisher:
Cengage Learning
EBK CFIN
EBK CFIN
Finance
ISBN:
9781337671743
Author:
BESLEY
Publisher:
CENGAGE LEARNING - CONSIGNMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Financial Accounting Intro Concepts Meth/Uses
Financial Accounting Intro Concepts Meth/Uses
Finance
ISBN:
9781285595047
Author:
Weil
Publisher:
Cengage
Pfin (with Mindtap, 1 Term Printed Access Card) (…
Pfin (with Mindtap, 1 Term Printed Access Card) (…
Finance
ISBN:
9780357033609
Author:
Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:
Cengage Learning
SEE MORE TEXTBOOKS