Question 16 1.5 pts A 5-year 5.8% annual coupon bond currently trades at 103. If interest...

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Question 16 1.5 pts A 5-year 5.8% annual coupon bond currently trades at 103. If interest rates decline by 25 basis points (b

Answer 1

Answer #1

Correct answer: 2.0 < duration <=4.0

Current Price of Bond (P) = 103

Change in interest rate = 0.0025

Bond price when interest rate decline (Pd) = 104

Bond price when interest rate increases (Pu) = 102

Approximate Duration of Bond:

Hope it will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.

Answer 2

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