Find the duration, modified duration, and convexity of bond

Assignment Help Finance Basics
Reference no: EM13154334

Below are details of a semiannual bond. Please show work in Excel spreadsheet.
Par value = 1000; Maturity 4 years; Market rate if interest (yield to Maturity) = 11% per annum; Coupon rate = 8% per year paid semiannually. 

a. Find the Duration, modified duration, and Convexity of the bond. Explain the meaning and importance of the concept of duration? What is meant by the term convexity with respect to bond prices? 
b. If the yield changes by 1 % what will be the change in price and what will be new price?
c. Also calculate the delta and the gamma. 
d. Which one is a better measure of predicting price change--duration or convexity-- and why?  

Reference no: EM13154334

Questions Cloud

Effect on a confidence interval : What is the effect on a confidence interval if one decreases both sample size and the level of confidence?
Probability and lottery per month problem : A state run monthly lottery can sell 13,111 tickets at $4 a piece. A ticket wins $100,000 with probability 0.00002, $100 with probability 0.006, and $10 with probability 0.08. On average, how much can the state expect to profit from the lottery pe..
Identify changes in market conditions : Identify changes in market conditions and their effect on equilibrium price and quantity for the following events:
Comparing the response times : Comparing the response times between 2 cab companies. companies A and B were each called at 50 randomly selected times. the calls to company A were independently made from the calls to company B. company A had a mean response time of 8.5 minutes with..
Find the duration, modified duration, and convexity of bond : Below are details of a semiannual bond. Please show work in Excel spreadsheet. Par value = 1000; Maturity 4 years; Market rate if interest (yield to Maturity) = 11% per annum; Coupon rate = 8% per year paid semiannually.
What decision should be made by optimist for inventory costs : Lakewood fashions must decide how many lots of assorted ski wear to order for its 3 stores.Information on pricing, sales and inventory costs has led to the following payoff table,in thousands.
Actual level of activity achieved during the month : A department has budgeted monthly manufacturing overhead cost of $270,000 plus $3 per direct labor hour. If a flexible budget report reflects $522,000 for total budgeted manufacturing cost for the month, the actual level of activity achieved durin..
Calculate the volume of the gas : A sample of neon gas used in a neon sign occupies a volume of 1.70 L at a pressure of 580 torr. Calculate the volume of the gas if the pressure in the glass tube of the sign is 781 torr.
What is the concentration of the naoh solution : If 0.5110 g of H2C2O4 x 2H2O completely neutralized 41.39 mL of the stock NaOH soln what is the concentration of the NaOH solution?

Reviews

Write a Review

Finance Basics Questions & Answers

  Reducing the variable cost

A linoleum producer has fixed expense of $70,000. Its product currently sells for $4 per unit and has a variable expense of $2.60 each unit.

  Constant growth dividend valuation model

You use constant growth dividend valuation model (i.e. Gordon model) to find out the current market price of stock. Show whether the price of the stock will rise or fall and by what percent?

  Components of capital structure

Critically discuss and describe the three major components of the capital structure of enterprise.

  The value of the investment in ten years

If 1000 dollars were invested now at a 12% rate componded annually what would be the value of the investment in teonyears

  Depreciation is computed to the nearest month

Depreciation is computed to the nearest month and Bundy uses the midyear convention

  Japanese banks

Banks in Japan are allowed to own stock

  Estimate the current value of a share

The Seneca Maintanance Corporation currently pays a common stock dividend of $1.50 per share. Dividends are expected to grow at a rate of 11 percent per year for the next four years and then to continue growing thereafter at a rate of 5 percent per y..

  Information about constant growth rate

What is the expected growth rate of Dorpac's dividends? What is the expected growth rate of Dorpac's share price?

  Calculate the expected value

Assume you won the lottery and were offered a choice of either $500,000 in cash or a gamble in which you would get $1 million if a head were flipped but zero if a tail came up.

  Primary activities of financial manager

Determine the amount earned during the accounting period on each outstanding share of common stock is called, Included in the primary activities of financial manager,

  Calculate the firms operating cycle

James Corporation is worried about managing cash efficiently. On the average, inventories have an age of 90 days, and accounts receivable are collected in sixty days.

  Determine traditional cost accounting

Problems encountered because of traditional cost Accounting and how did traditional cost accounting concepts are practices contribute to the problems at the UniCo

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd