Sue buys a 10 year 1000 bond at par. The Macaulay duration is 8.329 years using...

Question

Question

Sue buys a 10 year 1000 bond at par. The Macaulay duration is 8.329 years using an annual effective interest rate of 6.8%. a.

Answer 1

Answer #1

Modified Duration = 8.329/1.068

Modified duration = 7.799 years

Change in bond price = -(7.799)(0.002)

Change in price = -1.56%

Answer 2

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