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Category > Business & Finance Posted 13 Jul 2017 My Price 12.00

1. Suppose the interest rate decreases

1. Suppose the interest rate decreases to 9% at an annual percentage rate. What will happen to the prices and durations of the two bonds in Spreadsheet 16.1?

2. a. In Concept Check 1, you calculated the price and duration of a 2-year maturity, 8% coupon bond making semiannual coupon payments when the market interest rate is 9%. Now suppose the interest rate increases to 9.05%. Calculate the new value of the bond and the percentage change in the bond’s price.

b. Calculate the percentage change in the bond’s price predicted by the duration formula in equation 16.2 or 16.3. Compare this value to your answer for (a)

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Status NEW Posted 13 Jul 2017 04:07 PM My Price 12.00

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