Given the following data:
U.S. T- Bonds
Compute the price of each bond.
Compute the duration and modified duration of each bond
Suppose the yield levels increase by 1%. Calculate the relative price change for each bond.
Estimate the relative price change for each bond using duration. Comment on the accuracy of the estimation.
An investor buys a French government, 10-year bond, paying annual coupon of 4.5%. Face value = 1000.
The investor is unsure of his investment horizon and considers 5 horizons: 5, 6, 7, 8, and 9 years.
Suppose that immediately after the investor has bought the bond, the interest rate changes.
Compute the investor's annual return for each of the 5 horizons for two scenarios: the yield increases by 1% and the yield decreases by 1%.
Put differently, complete the following table:
YTM = 5.5%
YTM = 3.5%
Given the data for the following bonds
Assume all bonds pay annual coupon.
Compute the price of the 3rd bond.
Calculate the YTM of the 3rd bond.