Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. what are the duration and modified duration of a s

What are the duration and modified duration of a seven-year, 3.5 percent coupon rate, annual...

70.2K

Verified Solution

Question

Accounting

What are the duration and modified duration of a seven-year, 3.5 percent coupon rate, annual coupon payment, $1000 par value government note priced today to yield 3 percent to maturity (use the text formulas or Excels Duration and MDuration functions)? What is the convexity of this instrument? [Recall that Bonds and Bond Properties.xls illustrates these calculations.] Using one of the following approximation formulas with yield data in decimal form,

[if text formula] % Change in Price 100 (-1.0 Duration (YieldNew-YieldOld)/(1+YieldOld)),

[if Excel function] % Change in Price 100 (-1.0 MDuration (YieldNew-YieldOld)),

what is the approximate percentage change in this bond's price if yields on comparable securities rise to 4 percent? What is the actual percentage change in this bond's price if yields on comparable securities rise to 4percent (use a financial calculator or Excels PV function)?

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