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Category > Business & Finance Posted 21 Jun 2017 My Price 6.00

Compute the duration for bond C, and rank the bonds on the basis of their price volatility

20. Compute the duration for bond C, and rank the bonds on the basis of their price volatility. The current rate of interest is 8 percent, so the prices of bonds A and B are $1,000 and $1,268 respectively.

Bond Coupon Term Duration
A 8% 10 years 7.25
B 12% 10 years 6.74
C 8% 5 years ?

Confirm your ranking by calculating the percentage change in the price of each bond when interest rates rise from 8 to 12 percent. (Bond A's and B's prices become $774 and $1,000 respectively.)

 

 

Answers

Alpha Geek
(8)
Status NEW Posted 21 Jun 2017 07:06 AM My Price 6.00

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Attachments

file 1498028473-477003_1_636335463107061511_Vond.xlsx preview (54 words )
Pe-----------rio-----------dCa-----------sh -----------Flo-----------wPe-----------rio-----------d X----------- ca-----------shf-----------low-----------PV -----------of -----------$1 -----------at -----------8%P-----------V o-----------f C-----------ash-----------flo-----------wTo-----------tal-----------Dur-----------ati-----------on -----------of -----------Bon-----------d C-----------Pri-----------ce -----------of -----------bon-----------d A----------- if----------- in-----------ter-----------est----------- ra-----------te -----------goe-----------s t-----------o 1-----------2%V-----------ola-----------tli-----------tyP-----------ric-----------e o-----------f b-----------ond----------- B -----------if -----------int-----------ere-----------st -----------rat-----------e g-----------oes----------- to----------- 12-----------%Pr-----------ice----------- of----------- bo-----------nd -----------C i-----------f i-----------nte-----------res-----------t r-----------ate----------- go-----------es -----------to -----------12%-----------Pre-----------sen-----------t V-----------alu-----------e o-----------f B-----------ond----------- CS-----------o R-----------ank----------- in----------- ac-----------cen-----------din-----------g o-----------rde-----------rBo-----------nd -----------C &-----------amp-----------;lt-----------; B-----------ond----------- A&-----------amp-----------;lt-----------; B-----------ond----------- B -----------
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