The Bank of Ghana issued a 3-year bond with a semi-annual coupon of 15.65%. The BIVA Bank purchased GHS 40 million of the bonds when the current yield of the bond was 15% on the market. a) Calculate the duration of the bond. b) An analyst with The BIVA Bank forecasts that the interest rate will rise by 0.5% next month. What is the percentage change in the price of the bond? c) What is the cedi change in the price of the bond? Calculate the new price of the bond on the market. d) Outline four (4) limitations of gap analysis.
The Bank of Ghana issued a 3-year bond with a semi-annual coupon of 15.65%. The BIVA Bank purchased GHS 40 million of the bonds when the current yield of the bond was 15% on the market. a) Calculate the duration of the bond. b) An analyst with The BIVA Bank forecasts that the interest rate will rise by 0.5% next month. What is the percentage change in the price of the bond? c) What is the cedi change in the price of the bond? Calculate the new price of the bond on the market. d) Outline four (4) limitations of gap analysis.
Chapter6: Fixed-income Securities: Characteristics And Valuation
Section: Chapter Questions
Problem 15P
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The Bank of Ghana issued a 3-year bond with a semi-annual coupon of 15.65%. The
BIVA Bank purchased GHS 40 million of the bonds when the current yield of the
bond was 15% on the market.
a) Calculate the duration of the bond.
b) An analyst with The BIVA Bank
next month. What is the percentage change in the price of the bond?
c) What is the cedi change in the price of the bond? Calculate the new price of the
bond on the market.
d) Outline four (4) limitations of gap analysis.
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