Modified duration of one year zero coupon bond

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Reference no: EM131849424

Calculate the following by hand and round to five decimal places for prices:

a. Calculate the Price, Macauley and modified duration of a one year zero coupon bond (Par Amount $100) selling for a YTM of 4.0%.

b. Calculate the Price, Macauley and modified duration of a twenty year zero coupon bond (Par Amount $100) selling for a YTM of 6.0%.

c. Calculate the Price, Macauley and modified duration of a five year 8% annual coupon bond (Par Amount $100) selling for a YTM of 5.3%.

d. Calculate the Price, Macauley and modified duration of a five year 2% annual coupon bond (Par Amount $100) selling for a YTM of 5.5%.

e. Calculate the Price, Macauley and modified duration of a five year 5.5% annual coupon bond (Par Amount $100) selling for a YTM of 5.4%.

f. Explain why the Fed used Quantitative Easing (the purchase of Treasury Bonds and Agency MBS) following the financial crisis to provide accommodative monetary policy instead of the traditional approach of influencing the Fed Funds rate.

Reference no: EM131849424

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