A. Calculate the price of a bond with the following characteristics. Coupon: 5.0

Question

A. Calculate the price of a bond with the following characteristics. Coupon: 5.00% Maturity: 4 Years Par Amount: $1,000 Required Return: 4.00%
B. Calculate the duration and modified duration for the bond in A.
C. Calculate the price of the bond from A using its modified duration if interest rates go up by 2.00% A. Calculate the price of a bond with the following characteristics. Coupon: 5.00% Maturity: 4 Years Par Amount: $1,000 Required Return: 4.00%
B. Calculate the duration and modified duration for the bond in A.
C. Calculate the price of the bond from A using its modified duration if interest rates go up by 2.00% Coupon: 5.00% Maturity: 4 Years Par Amount: $1,000 Required Return: 4.00%
B. Calculate the duration and modified duration for the bond in A.
C. Calculate the price of the bond from A using its modified duration if interest rates go up by 2.00%

Explanation / Answer

Modified Duration = 3.73/(1+0.04) = 3.59

Bond Par Value 1000 Coupon Rate 5.0% Yield 4.0% Maturity 4 Years CF PV Factor PV CF PV/Bond Price PV/Bond Price* Years 1 50 0.96 48.08 0.05 0.05 2 50 0.92 46.23 0.04 0.09 3 50 0.89 44.45 0.04 0.13 4 50 0.85 42.74 0.04 0.16 4 1000 0.85 854.80 0.82 3.30 Bond Price 1036.30 Duration = 3.73

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