Calculate the duration of an 8 percent, $1,000 par bond that matures in the three years if the bond's YTM is 10 percent and interest is paid semi-annually.
a) Calculate this bond's modified duration.
b) Assuming the bond's YTM goes from 10 percent to 9.5 percent, calculate an estimate of the price change.

Please show the work. Excel spreadsheet would be great.

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Calculate the duration of an 8 percent, $1,000 par bond that matures in the three years if the bond's TYM is 10 percent and interest is paid semiannually.

?In general, for a bond paying constant periodic coupons, the formula for Macaulay's Duration is:

?In the formula, C is the annual coupon rate, M is the bond maturity (in years), and YTM is the yield to maturity, n is the compounding frequency (i.e. n=1 for annual 2 for semiannual , 4 for quarterly) ...

Solution Summary

Calculates duration, modified duration and price change when interest rate changes.

Assume coupons are paid annually. Here are the prices of three bonds with 10-year maturities:
Bond Coupon (%) Price (%)
2 81.62
4 98.39
8 133.42
________________________________________
a. What is the yield to maturity fo

What is the duration of a bond with three years to maturity and a coupon of 6 percent paid annually if the bond sells at par? (Round your answer to 5 decimal places. (e.g., 32.16161)

1. Compute the duration for bond C, and rank the bonds on the basis of their price volatility. The current rate of interest is 8%, so the prices of bonds A and B are $1,000 and $1,268, respectively
.
BOND COUPON TERM DURATION
A 8% 10 YRS 7.25
B 12% 10 YRS 6.74
C 8% 5YRS ?
Confirm your ranking by calculating the percenta

Duration of a coupon paying bond is:
Equal to its number of payments.
Less than a zero coupon bond.
Equal to the zero coupon bond.
Equal to its maturity.
None of the above.

1. A certain airplane has two independent alternators to provide electrical power. The probability that a given alternator will fail on 1-hour flight is 0.02. What is the probability that
(a) Both will fail?
(b) Neither will fail?
(c) One or other will fail?
2. The contingency table belo

1) You owe the following $1,000 bonds:
Bond A 4% coupon due in three yrs
Bond B 5% coupon due in 5 yrs
Bond C 7% coupon due in 10 yrs
Currently the structure of yields is positive so that each bond sells for its par value. However, you expect that inflation

Consider the following bonds:
a. [7] What is the duration of a five-year bond with a 6.5 percent semiannual coupon if the yield to maturity (ytm) is 7.125%?
b. [3] What is the duration of a 20-year zero coupon bond with a yield to maturity of 7.625%
c. [2] You expect a sudden, but widely unanticipated, increase in the mar

What are the two risk components of interest rate risk? Relative to them, what are the implications of holding a bond to its duration versus holding the bond to maturity? (Be careful to explain the relation of Duration to Interest Rate Risk.)

1a- A bond portfolio consists of the following debt securities:
Bond 1: 3-year, zero-coupon note; $1,200,000 holdings
Bond 2: 7-year, zero-coupon note; $1,500,000 holdings
Bond 3: 10-year, zero-coupon note; $1,650,000 holdings
Bond 4: 25-year, zero-coupon bond; $1,000,000 holdings
The key rate duration of the portfolio is