Question 3 A$100 000 bond has 3 years to maturity, and 8% p.a. coupon rate (paid annually). The current yield rate is 10%. Required: a) What is the duration of this bond? b) What is the price of this bond? c) If the current yield is decreased by 100 basis points, 1) What is the percentage change in bond price using the duration approach? 2) What is the price of this bond with this new yield rate?

Question 3 A$100 000 bond has 3 years to maturity, and 8% p.a. coupon rate (paid annually). The current yield rate is 10%. Required: a) What is the duration of this bond? b) What is the price of this bond? c) If the current yield is decreased by 100 basis points, 1) What is the percentage change in bond price using the duration approach? 2) What is the price of this bond with this new yield rate?

Personal Finance

13th Edition

ISBN:9781337669214

Author:GARMAN

Publisher:GARMAN

Chapter14: Investing In Stocks And Bonds

Section: Chapter Questions

Problem 6DTM

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