Calculate the approximate bond price change

Assignment Help Financial Management

Reference no: EM132001813

Suppose a 10-year zero-coupon bond with a face value of $100 trades at $69.20205.

a. What is the yield to maturity and modified duration of the zero-coupon bond?

b. Calculate the approximate bond price change for a 50-basis-point increase in the yield, based on the modified duration you calculated in part (a). Also calculate the exact new bond price based on the new yield to maturity.

c. Calculate the convexity of the 10-year zero-coupon bond. d. Now use the formula (equation (7.15) that takes into account b duration and approximate the new bond price. Compare your result to that in part (b).

Reference no: EM132001813

Questions Cloud

How much do the contest sponsors have to deposit : The super prize in a contest is $10 million. This prize will be paid out in equal yearly payments over the next 20 years.

What is amount of interest expense sunland will show : What is amount of Interest expense sunland will show with relation to these bonds for the year ended December 31st 2017.

What is multicultural competence : What is multicultural competence? What are three things a person can do to increase his/her personal level of multicultural competence?

Explain the differences between stereotyping-prejudice : Explain the differences between stereotyping, prejudice, discrimination and institutional racism.

Calculate the approximate bond price change : Calculate the approximate bond price change for a 50-basis-point increase in the yield, based on the modified duration you calculated in part (a).

Discuss white privilege-apply concepts of white privilege : Discuss White Privilege. Apply concepts of White Privilege to any other kind of privilege that those in power enjoy.

Research on financial fraud in the banking industry : Do some research on financial fraud in the banking industry within the past 10 years. Share information about the motivations of the bank managers

Stages of the racial and cultural identity development : Explain the stages of the Racial and Cultural Identity Development (R/CID) model.

Determine how much cash does the company have : How much cash does the company have? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) Cash $

User Account

All Pages