Question 1 3 pts A bond with face value = 6,000 currently trades at par. Its...

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Question 1 3 pts A bond with face value = 6,000 currently trades at par. Its Macaulay duration is 4.49 years and its convexit

business finance

Answer 1

Answer #1

Modified Duration = Macaulay Duration / (1 + YTM) = 4.49 / (1 + 0.0281) = 4.37

Dollar Change in Price = [-Duration * Change in Yield * Current Bond Price] + [Convexity * (Change in Yield)² * Current Bond Price]

= [-4.37 * (0.0207 - 0.0281) * $6,000] + [56.88 * (0.0207 - 0.0281)² * $6,000]

= $193.91 + $18.69 = $212.60

Answer 2

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