A bond currently sells for $1,150, which gives it a yield to maturity of 5%. Sup
ID: 2644426 • Letter: A
Question
A bond currently sells for $1,150, which gives it a yield to maturity of 5%. Suppose that if the yield increases by 10 basis points, the price of the bond falls to $1,130. What is the duration of this bond? (Do not round intermediate calculations. Round your answer to 4 decimal places.)
A bond currently sells for $1,150, which gives it a yield to maturity of 5%. Suppose that if the yield increases by 10 basis points, the price of the bond falls to $1,130. What is the duration of this bond? (Do not round intermediate calculations. Round your answer to 4 decimal places.)
Explanation / Answer
Question:
A bond currently sells for $1,150, which gives it a YTM of 5%. Suppose that if the yield increases
by 10 basis points, the price of the bond falls to $1,130. What is the duration of this bond?
Solution: Computation of the During of the Bond
Given information
Par Value $(1,000.00)
YTM 5%
Present Value $1,150.00
Coupon amount 0
No of years = - NPER(5%,0,1150,(-1000)) = 2.864551591
Par Value $(1,000.00)
YTM 5.10%
Present Value $1,130.00
Coupon amount 0
No of years = - NPER(5.1%,0,1130,(-1000)) = 2.457026395
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