The duration of a twenty year, 6 percent coupon bond when the interest rate is 7.80...
The duration of a twenty year, 6 percent coupon bond when the interest rate is 7.80 years. What happens to the price of the bond if the interest rates rises to 8%?
it rises 15.6%
it rises 14.7%
it falls 15.6%
it falls 14.7%
Homework Answers
% change in Price = -Duration x % change in yield
a). % change in Price = -7.80 x 8% = -62.40%
b). % change in Price = -7.80 x 15.6% = -121.68%
c). % change in Price = -7.80 x 14.7% = -114.66%
d). % change in Price = -7.80 x (-15.6%) = 121.68%
e). % change in Price = -7.80 x (-14.7%) = 114.66%
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