Maurice Tutor

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  • MCS,PHD
    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

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  • Professor
    Phoniex University
    Oct-2001 - Nov-2016

Category > HR Management Posted 30 Nov 2017 My Price 8.00

TBR Company

  1. You ran a regression of the yield of TBR Company’s 10-year bond on the 10-year U.S. Treasury benchmark’s yield using month-end data for the past year. You found the fol- lowing result:

Yield TBR = 0.54 + 1.22 Yield Treasury

where Yield TBR is the yield on the TBR bond and Yield Treasury is the yield on the U.S. Treasury bond. The modified duration on the 10-year U.S. Treasury is 7.0 years, and modified duration on the TBR bond is 6.93 years.

    1. Calculate the percentage change in the price of the 10-year U.S. Treasury, assuming a 50-basis-point change in the yield on the 10-year U.S. Treasury.

    2. Calculate the percentage change in the price of the TBR bond, using the regression

equation, assuming a 50-basis-point change in the yield on the 10-year U.S. Treasury.

 

 

Bond A

 

Bond B

  

Coupons

Annual

Annual

  

Maturity

3 years

3 years

  

Coupon rate

10%

6%

  

Yield to maturity

10.65%

10.75%

  

Price

98.40

88.34

  

 

Term

 

Spot Rates (Zero Coupon)

1 year

5%

2 year

8%

3 year

11%

Answers

Maurice Tutor
(5)
Status NEW Posted 30 Nov 2017 08:11 PM My Price 8.00

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