Bond A is a 4% coupon (paid semi-annually) with 3 years to maturity and $100 face value per contract. The yield curve is flat at 8% per annum. a) Compute the bond's Macaulay Duration. b) Compute the bond's Modified Dollar Duration. c) Yield curves take various shapes, therefore, it is important to understand why these yield curves shift and change slope over time. There are a number of theories and hypotheses of interest rate determination that attempt to explain their shape. Identify and delzribe three (3) of these theories or hypotheses giving examples of each.

Bond A is a 4% coupon (paid semi-annually) with 3 years to maturity and $100 face value per contract. The yield curve is flat at 8% per annum. a) Compute the bond's Macaulay Duration. b) Compute the bond's Modified Dollar Duration. c) Yield curves take various shapes, therefore, it is important to understand why these yield curves shift and change slope over time. There are a number of theories and hypotheses of interest rate determination that attempt to explain their shape. Identify and delzribe three (3) of these theories or hypotheses giving examples of each.

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 17P: Bond Value as Maturity Approaches An investor has two bonds in his portfolio. Each bond matures in 4...

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