QUESTION 18 4 points Save Bongbpice current Price $1.040. The yield on the bond is 8%....

Question

Question

Answer 1

Answer #1

Given about a bond,

Current price = $1040

Yield Y = 8%

As Yield increases by dy = 0.1%, price of the bond decreases by -$5

Change in price dP = -D*P*dy

where D = modified duration

=> D = -1*(-5)/(1040*0.001) = 4.81 years

So, Modified duration of the bond is 4.81 years

Option C is correct.

Answer 2

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