duration PQ

# duration PQ - The following are a few questions on duration...

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The following are a few questions on duration and convexity. Do try to solve them on your own before you have a look at the solutions. Expect similar difficulty and detail in quizzes and exams. Q1. Rank the following bonds in order of descending duration: Bond Coupon(%) Time to maturity (yrs) Yield to maturity (%) A 15 20 10 B 15 15 10 C 0 20 10 D 8 20 10 E 15 15 15 Q2. The Macualay duration of a bond selling at \$81.12 is 10.774 years. Calculate the percentage and dollar change in price of the bond if yield falls from 9% to 8.95%. Q3. Calculate the percentage and dollar change in price for a bond selling at 101.2666 with modified duration equal to 4.2 and convexity equal to 20.74, if the yield changes by 0.75%. Q4. A 8% \$100 coupon, 4 year coupon bond makes its coupon payments at the start of each year. Calculate the modified duration using YTM = 5%. Is its modified duration likely to be lower or higher than a similar bond that makes payments at the year ends only? Q5.

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## This note was uploaded on 03/19/2012 for the course FINN 321 taught by Professor Farahsaid during the Spring '12 term at Alvin CC.

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duration PQ - The following are a few questions on duration...

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