Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. 2. estimate the duration of a par value 5-year, 20

2. Estimate the DURATION of a par value 5-year, 20% coupon bond. Discount rate is...

60.1K

Verified Solution

Question

Finance

image

2. Estimate the DURATION of a par value 5-year, 20% coupon bond. Discount rate is also 20%. 3 4 1 Year 2 Coupon 20% PV % PV of Total Value 5 Weighted Maturity (1)*(4) 1 2 3 | | Duration= a. Interpret your results. What does duration tell you? i. Based on your estimated duration, what are the effect on the bond's price if interest rates go from 20% to 21%. Explain. %AP - :-DURG ii. If Duration is 4 years, how does affect the price of the bond? (Re-estimate the change in price with a 4-year duration in the formula above)

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students