Ideal planned investment time period for this bond

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Reference no: EM131849436

You are analyzing a treasury bond that matures on July 15, 2038 (today’s date is October 4, 2017). This bond has a coupon rate of 4.125% and makes semiannual payments. The required return (or yield is currently 2.345%. The face value is $1000/ a. What is the present value of this bond in dollars? b. What is the duration (Macaulay duration) of this bond? c. If the yield on this bond suddenly increases by 0.25%, using duration, what is the approximate new price of this bond after the yield change/ d. In order to best balance the opposing effects of price risk and reinvestment rate risk, what would be the ideal planned investment time period for this bond?

Reference no: EM131849436

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