Homework Answers
% Change in Price = Modified Duration * Change in YTM
= 4.66% * 0.1
= 0.466%
price will be decreased by 0.466%
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acaulay's Duration: Modified Duration: Macaulay's Duration Modified Duration =- 1+ y Projected %...
1. Which of the following is an example of curve duration? A. Macaulay duration. B. Modified...
1. Which of the following is an example of curve duration? A. Macaulay duration. B. Modified duration. C. Effective duration. 2. Two statements about duration are given as follows: Statement 1: "Duration measures the percentage change in bond price for a one basis point change in the yield." Statement 2: "Money duration measures the price change in bond price for a one basis point change in the yield." A. Both statements are correct. B. Exactly one of the statement is...
13. Consider a bond selling at par with modified duration of 10.6 years and convexity of...
13. Consider a bond selling at par with modified duration of 10.6 years and convexity of 210. A 2% decrease in yield would cause the price to increase by 21.2%, according to the duration rule. What would be the percentage price change according to the duration-with-convexity rule? (Record your answer rounded to 3 decimal places) Use the data given in the chart below to answers questions 14-16 Year Yield to Maturity 7 20% 705% 7 .00% 6.94% 6.90% 6.90% 7.12%...
Given a 10 year ZCB trading with a 5% yield, calculate the modified duration of the...
Given a 10 year ZCB trading with a 5% yield, calculate the modified duration of the bond and determine the price change given an instantaneous shift in yields by 1%. What would be the difference in the calculated price change if a convexity adjustment is applied? Would this adjustment be larger given a larger shift in yields?
Tropical Dreams bonds have a duration of 6.8 years and a modified duration of 6.50. If...
Tropical Dreams bonds have a duration of 6.8 years and a modified duration of 6.50. If the yield is expected to decrease by 0.1%, what is the expected percentage change in the price of the bonds issued by Tropical Dreams? The yield to maturity is 9% and the bonds mature in ten years. The bonds carry a 9% coupon, paid semiannually. The par value is $1,000.
2. Tropical Dreams bonds have a duration of 6.8 years and a modified duration of 6.50....
2. Tropical Dreams bonds have a duration of 6.8 years and a modified duration of 6.50. If the yield is expected to decrease by 0.1%, what is the expected percentage change in the price of the bonds issued by Tropical Dreams? The yield to maturity is 9% and the bonds mature in ten years. The bonds carry a 9% coupon, paid semiannually. The par value is $1,000
a. A 6% coupon bond paying interest annually has a modified duration of 7 years, sells...
a. A 6% coupon bond paying interest annually has a modified duration of 7 years, sells for $820, and is priced at a yield to maturity of 9%. If the YTM decreases to 8%, what is the predicted change in price ($) using the duration concept? (2 marks) b. A bond with annual coupon payments has a coupon rate of 6%, yield to maturity of 7 % , and Macaulay duration of 12 years. What is the bond's modified duration?...
16. A portfolio manager owns S 15 million par value of bond ABC. The bond is trading at 80 and has a modified duration of 5. The portfolio manager is considering swapping out of bond ABC and into...
16. A portfolio manager owns S 15 million par value of bond ABC. The bond is trading at 80 and has a modified duration of 5. The portfolio manager is considering swapping out of bond ABC and into bond XYZ. The price of this bond is 85 and it has a modified duration of 4 Answer the below questions. (a) What is the dollar duration of bond ABC per 100-basis-point change in yield? b) What does that mean? Explain e)...
This was all the information that I was given. QUESTION 1 What is the duration of...
This was all the information that I was given.
QUESTION 1 What is the duration of a five year, $1,000 Treasury bond with a 10 percent coupon (paid semiannually) if its yield to maturity is 12 percent? SUGGESTION: use the duration calculation spreadsheet provided for this problem. QUESTION 2 What is the modified duration of the bond in question one? QUESTION 3 Using the modified duration value from question two, what is the predicted price change for the bond if...
Calculate the Duration and Modified Duration of each bond (already completed). Create a chart the shows...
Calculate the Duration and Modified Duration of each bond
(already completed). Create a chart the shows both measures
versus term to maturity. Does duration increase linearly
with term? If not, what relationship do you see?
А 2 Settlement Date 3 Maturity Date 4 Coupon Rate 5 Market Price 6 Face Value 7 Required Return 8 Frequency Bond A 2/15/2017 8/15/2027 4.00% 975.00 1,000.00 4.35% 2.00 Bond B 2/15/2017 5/15/2037 6.25% 1,062.00 1,000.00 5.50% 2.00 Bond C 2/15/2017 6/15/2047 7.40% 1,103.00...
A 4-year 12% coupon bond has a yield of 10%. (a) What are its Macaulay Duration,...
A 4-year 12% coupon bond has a yield of 10%. (a) What are its Macaulay Duration, Modified duration, and convexity (I do not mean effective convexity) (b) What is the actual price change, Modified Duration predicted price change and Modified Duration + convexity predicted change in price for an increase of 50 basis point in the yield. Assume a flat term structure before and after the increase and annual coupons. (Note: For convexity do not use effective convexity measure)
13. Consider a bond selling at par with modified duration of 10.6 years and convexity of 210. A 2% decrease in yield would cause the price to increase by 21.2%, according to the duration rule. What would be the percentage price change according to the duration-with-convexity rule? (Record your answer rounded to 3 decimal places) Use the data given in the chart below to answers questions 14-16 Year Yield to Maturity 7 20% 705% 7 .00% 6.94% 6.90% 6.90% 7.12%...
2. Tropical Dreams bonds have a duration of 6.8 years and a modified duration of 6.50. If the yield is expected to decrease by 0.1%, what is the expected percentage change in the price of the bonds issued by Tropical Dreams? The yield to maturity is 9% and the bonds mature in ten years. The bonds carry a 9% coupon, paid semiannually. The par value is $1,000
a. A 6% coupon bond paying interest annually has a modified duration of 7 years, sells for $820, and is priced at a yield to maturity of 9%. If the YTM decreases to 8%, what is the predicted change in price ($) using the duration concept? (2 marks) b. A bond with annual coupon payments has a coupon rate of 6%, yield to maturity of 7 % , and Macaulay duration of 12 years. What is the bond's modified duration?...
16. A portfolio manager owns S 15 million par value of bond ABC. The bond is trading at 80 and has a modified duration of 5. The portfolio manager is considering swapping out of bond ABC and into bond XYZ. The price of this bond is 85 and it has a modified duration of 4 Answer the below questions. (a) What is the dollar duration of bond ABC per 100-basis-point change in yield? b) What does that mean? Explain e)...
This was all the information that I was given.
QUESTION 1 What is the duration of a five year, $1,000 Treasury bond with a 10 percent coupon (paid semiannually) if its yield to maturity is 12 percent? SUGGESTION: use the duration calculation spreadsheet provided for this problem. QUESTION 2 What is the modified duration of the bond in question one? QUESTION 3 Using the modified duration value from question two, what is the predicted price change for the bond if...
Calculate the Duration and Modified Duration of each bond
(already completed). Create a chart the shows both measures
versus term to maturity. Does duration increase linearly
with term? If not, what relationship do you see?
А 2 Settlement Date 3 Maturity Date 4 Coupon Rate 5 Market Price 6 Face Value 7 Required Return 8 Frequency Bond A 2/15/2017 8/15/2027 4.00% 975.00 1,000.00 4.35% 2.00 Bond B 2/15/2017 5/15/2037 6.25% 1,062.00 1,000.00 5.50% 2.00 Bond C 2/15/2017 6/15/2047 7.40% 1,103.00...
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