6. There is a 10-year, 10% semiannual coupon, $1,000 par value bond is selling f

Question

6. There is a 10-year, 10% semiannual coupon, $1,000 par value bond is selling for $1,135.90 with an 8% yield to maturity. If the bond is called after 4 years at $1,050, what’s the required rate of return?

. There is a 2-year par=$100 bond with 8% coupon. The annual yield is 7.5%. What's the duration and modified duration of this bond?

6. There is a 10-year, 10% semiannual coupon, $1,000 par value bond is selling for $1,135.90 with an 8% yield to maturity. If the bond is called after 4 years at $1,050, what’s the required rate of return?

. There is a 2-year par=$100 bond with 8% coupon. The annual yield is 7.5%. What's the duration and modified duration of this bond?

Explanation / Answer

Bond is selling at $1,135.90

Now it will be called after 4 years for $1,050 which means FV = 1050

Input the following in the financial caluclator

PV = 1135.9; FV = 1050; n = 2*4; PMT = 50; calculate 1/y = 3.58%*2 = 7.16% annual return

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