1. What is the Macaulay duration of a 10.4 percent coupon bond with five years t

Question

1. What is the Macaulay duration of a 10.4 percent coupon bond with five years to maturity and a current price of $974.60? What is the modified duration? (Round your answer to 3 decimal places.)

Duration

  Macaulay

Years  

  Modified

Years  

2. Consider a 9.00 percent coupon bond with six years to maturity and a current price of $958.50. Suppose the yield on the bond suddenly increases by 2 percent.

1.

Use duration to estimate the new price of the bond. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

  Price

$   

2.

Calculate the new bond price. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

  Price

$   

3. A Treasury bond with 8 years to maturity is currently quoted at 108:7. The bond has a coupon rate of 8.3 percent. What is the yield value of a 32nd for this bond? (Round your answer to 3 decimal places.)

  Yield value (in basis point)

1. What is the Macaulay duration of a 10.4 percent coupon bond with five years to maturity and a current price of $974.60? What is the modified duration? (Round your answer to 3 decimal places.)

Explanation / Answer

Modified Duration=1/(1+.104)(1*pvcf+2*pvcf+3*pvcf+4*pvcf+5*pvcf)/.104*974.6 0.905797*10.51771 9.526910165 Maccaulay Duration=Modified Duration(1+.104) 10.51770864 Present Values Discounted at Yield Price Interest Discounting Factor@10.4% I*Dcf a (I*Dcf)*a 974.6 101.3584 0.905797101 91.81014 1 91.81014 974.6 101.3584 0.820468389 83.16136 2 166.3227 974.6 101.3584 0.743177889 75.32732 3 225.982 974.6 101.3584 0.673168377 68.23127 4 272.9251 974.6 101.3584 0.609753965 61.80369 5 309.0184 1066.058 New Price of the Bond at Duration of 9.5 years 1 974.6 101.3584 0.905797 91.81014 2 974.6 101.3584 0.820468 83.16136 3 974.6 101.3584 0.743178 75.32732 4 974.6 101.3584 0.673168 68.23127 5 974.6 101.3584 0.609754 61.80369 6 974.6 101.3584 0.552313 55.9816 7 974.6 101.3584 0.500284 50.70797 8 974.6 101.3584 0.453156 45.93113 9 974.6 101.3584 0.410467 41.60429 0.5 974.6 50.6792 0.3718 18.84252 974.6 0.3718 362.3563 New Price 955.7576 2 Present Values Discounted at Yield Price Interest@9% Discounting Factor@11% I*Dcf 958.5 86.265 0.900900901 77.71622 958.5 86.265 0.811622433 70.01461 958.5 86.265 0.731191381 63.07622 958.5 86.265 0.658730974 56.82543 958.5 86.265 0.593451328 51.19408 958.5 86.265 0.534640836 46.12079 Maturity 958.5 0.534640836 512.4532 Price of the Bond 877.4006 3. Current Yield=Annual Interest/Bond Price 9.0221 8.3

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