
A 12-year, 8 percent coupon bond with a YTM of 12 percent has a modified duration...
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?...
What is the percent change in the value of a bond portfolio with a modified duration of 8.25 years with a decrease in interest rates of 45 basis points?
Suppose you own a bond issued by X. that has a Modified duration of 16 years. Interest rates are currently 1.5% but you believe the Fed is about to decrease interest rates by 50 basis points (1 basis point = 0.0001) in order to stimulate the economy further. Your predicted percentage price change on this X bond is ________ A) -8.00% B) -5.62% C) 5.62% D) 8.00% 8.Market economists all predict a rise in interest rates. An astute bond manager...
Bond Y has a 30-year maturity, an 8% coupon, and sells at an initial yield-to-maturity (YTM) of 8 percent. The modified duration of Bond Y is 11.26 years and its convexity measure equals 212.40. If the bond's yield increases from 8% to 10% how much on a percentage basis is the Duration-With- Convexity Rule more accurate (Part 1)? Briefly explain the concept of Convexity Measure as it relates to Bond Y (Part 2):
Miller Corporation has a premium bond making semiannual payments. The bond pays a coupon of 12 percent, has a YTM of 10 percent, and has 12 years to maturity. The Modigliani Company has a discount bond making semiannual payments. This bond pays a coupon of 10 percent, has a YTM of 12 percent, and also has 12 years to maturity. What is the price of each bond today? (Do not round intermediate calculations and round your answers to 2 decimal...
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)
Bond P is a premium bond with a coupon of 8.8 percent , a YTM of 7.55 percent, and 15 years to maturity. Bond D is a discount bond with a coupon of 8.8 percent, a YTM of 10.55 percent, and also 15 years to maturity. If interest rates remain unchanged, what do you expect the price of these bonds to be 1 year from now? In 5 years? In 10 years? In 14 years? In 15 years?
What is the modified duration of a three-year $1,000 par value bond with a 5% coupon paid semi- annually that is priced to yield 4%? 2.61 5.37 2.77 5.65 Question 6 4 pts You own two bonds. You have $2,000,000 in Bond A which has a modified duration of 8.14. You have $2,250,000 in Bond B which has a modified duration of 4.23. If rates rise by 50 basis points, what would be the approximate impact of the value of...
4. What is the duration of a four-year, $1,500 bond that pays a coupon (annual) of 12% that trades at a yield of 16%. Calculate is the expected change in the bond’s price if interest rates fall by 0.70 percent (70 basis points)?
1. Consider a bond that has a coupon of 8% paid annually and has a maturity of 5 years. The bond is currently selling for $1,047.34, which means its YTM is 6.85%. Compute its duration. If interest rate (YTM) is expected to increase by 75 basis points, what is the expected dollar change in price? Percentage change in price? Using duration to obtain approximate answers for question (b). You are managing a portfolio of $1 million. Your target duration is...