Consider an 8% annual coupon bond trading to yield 6% with 3 years to maturity and a par value of $1000. a. What is the Duration? b. What is Modified Duration? c. What is expected Price change of Bond for a 5 basis point (.05%, .0005) increase in YTM using modified duration?

Consider an 8% annual coupon bond trading to yield 6% with 3 years to maturity and a par value of $1000. a. What is the Duration? b. What is Modified Duration? c. What is expected Price change of Bond for a 5 basis point (.05%, .0005) increase in YTM using modified duration?

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 8MC: Suppose a 10-year, 10% semiannual coupon bond with a par value of 1,000 is currently selling for...

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Question

2. Consider an 8% annual coupon bond trading to yield 6% with 3 years to maturity and a par value of $1000.

a. What is the Duration?

b. What is Modified Duration?

c. What is expected Price change of Bond for a 5 basis point (.05%, .0005) increase in YTM using modified duration?

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