ric_ps2

ric_ps2 - Riccardo Colacito Finance Division Problem Set 2...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Riccardo Colacito Finance Division Problem Set 2 Investments Due date: Thursday March 25 2010 in class 1. A bond has an annualized coupon rate of 9.80%, 4 years to maturity, and sells at an annualized yield to maturity of 11.50%. The bond pays interest semi-annually and has a par value of $1,000. (a) Calculate the duration of the bond. (b) What is the modifled duration of the bond? (c) If the bonds yield changes to 11.65%, what is the estimated percentage change in the bonds price that would occur? (d) What would be the new price of the bond? 2. Consider the following three bonds. You are investigating how the bonds would react to changes in interest rates. Bond A Zero-Coupon Bond Bond B Face Value $1,000 $1,000 $1,000 Years to Maturity 3 2.85 3 Coupon rate 5.50% 0% 8.75% Yield to maturity 4.80% 4.80% 4.80% Assume that coupons are paid once a year. (a) Find the duration of each bond....
View Full Document

Page1 / 2

ric_ps2 - Riccardo Colacito Finance Division Problem Set 2...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online