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Determine the money duration

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Reference no: EM132855580

Problem - A pension fund manager holds a USD 50 million (par value) position in a 3.75% General Motors bond that matures on 25 February 2024. The bond is priced flat at 97.25 per 100 of par value to yield 5.0815% on a street convention semi-annual bond basis for settlement on 15 March 2021. The total market value of the position, including the accrued interest, is USD9,875,000 or 98.750 of 100 of par value. The bond's annual Macaulay duration is 2.806707.

Required -

(i) Determine the money duration per 100 in par value for the General Motors bond.

(ii) Using the money duration, estimate the loss on the position for each 5 bp increase in the YTM for that settlement date.

Reference no: EM132855580

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