13.169 Answer Previous page The following information will be used for the next
ID: 2780398 • Letter: 1
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13.169 Answer Previous page The following information will be used for the next 7 questions An investor is considering investing in a 4 year, 8% coupon bon (semi-annual) that has a par value of $100 The yield on this bond is 10%, continuously compounded. Based on the previous calculations, if there is a .5% change in the price of the bond, how much is the price impacted? (ün dollars, to 2 decimal places) Take all previous calculations to 3 decimal places to ensure accuracy 1.613 Answer The following information will be used for the next 7 questions An investor is considering investing in a 4 year, 8% coupon bon (semi-annual) that has a par value of $100. The yield on this bond is 10%, continuously compounded Based on the previous calculations, if there is a-3.0% change in the price of the bond, how much is the price impacted? (in dollars, to 2 decimal places)Explanation / Answer
Hence change =
Bond Price $919.50 $934.84 If Yield Changes By -0.50% Face Value 1,000 1000 Bond Price Will Change By 15.34 Coupon Rate 8.00% 8% Life in Years 4 4 Modified Duration Predicts 15.18 Yield 10.52% 10% Convexity Adjustment 0.15 Frequency 2 2 Total Predicted Change 15.34 Macaulay Duration 3.48 Actual New Price $934.84 Modified Duration 3.30 Predicted New Price $934.84 Convexity 13.44 Difference ($0.00) Period Cash Flow PV Cash Flow Duration Calc Convexity Calc 0 ($919.50) 1 40.00 38.00 38.00 68.60 2 40.00 36.10 72.21 195.52 3 40.00 34.30 102.90 371.50 4 40.00 32.59 130.34 588.23 5 40.00 30.96 154.79 838.26 6 40.00 29.41 176.47 1,114.94 7 40.00 27.94 195.59 1,412.32 8 1,040.00 690.20 5,521.59 44,853.07Related Questions
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