QUESTION 33 Using the given information compute price percentage change if yield increases by 200 basis...
QUESTION 33
- Using the given information compute price percentage change if yield increases by 200 basis points.
|
Yield to Maturity |
7% |
||
|
Macaulay Duration |
4.397545 |
||
|
a. |
The value of the bond will decrease by 8.22% of its current market value. |
||
|
b. |
The value of the bond will decrease by 8.60% of its current market value. |
||
|
c. |
The value of the bond will increase by 8.60% of its current market value. |
||
Homework Answers
Modified duration = macaulay duration/(1+YTM) = 4.397545/(1+0.07)=4.1098
% change in bond price = -modified duration*yield change = -4.1098*0.02=-8.22%
a is correct
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QUESTION 33
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