Your investment horizon is four years from today

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Reference no: EM132003720

Suppose you purchase a five-year, 15 percent coupon bond (paid annually) that is priced to yield 9 percent. The face value of the bond is $1,000. A) Show that the duration of this bond is equal to four years. B) Show that, if interest rates drop to 8 percent within the next year and that if your investment horizon is four years from today, you will still earn approximately a 9 percent yield on your investment. C) Show that, if interest rates increase to 10 percent within the next year and that if your investment horizon is four years from today, you will still earn approximately a 9 percent yield on your investment.

Reference no: EM132003720

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