38. The duration of a $1000, 2-year, 6% coupon bond (interest paid annually)
is _____ when market rates are 8%. The 8% PV factors are: .9259 1 YR; .8573 2 YR
a. 2.036 b. 1.971 c. 1.94 d. 1.856
39. As bond maturity _________, so does the _________ and ________.
a. decreases; coupon rate; market price.
b. decreases; duration; face value.
c. increases; duration; price variability.
d. increases; market price; coupon rate.
1.
=(1*6%*1000*0.9259+2*(1000+6%*1000)*0.8573)/(6%*1000*0.9259+(1000+6%*1000)*0.8573)
=1.94238882
2.
c. increases; duration; price variability.
Duration is directly related to maturity
Price variability is directly related to duration
38. The duration of a $1000, 2-year, 6% coupon bond (interest paid annually) is _____...
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