Unformatted text preview: YTM on this bond?
a. 7%
b. 8%
c. 9%
d. 10% Feedback:
Mode = End
FV = 1,000
N = 10
I=?
PMT = 0
PV = 508
10. You calculated duration of a bond which was 3.5. If the interest rate of the bond
decreases by 1%, what happens to the price of the bond?
a. Decrease by $3.50
b. Decrease by 3.50%
c. Increase by 3.50%
d. Increase by $3.50
e. There is no change in price
11. A 10year bond is currently priced at $956.84. It has the coupon rate of 6%, paid
semiannually and its face value is $1,000. The discount rate of the bond is 7.64%. If the
bond matures in 3 years, what is the duration of the bond?
a. 2.25 years
b. 2.78 years
c. 4.51 years
d. 5.57 years
Feedback:
Duration = ! !"# ! !
!! ! ! ! ! ! = !" ! !
!" ! !
!" ! !
!" ! !
!" ! !
!"#" ! !
! (!!!.!"#$)! (!!!.!"#$)! (!!!.!"#$)! (!!!.!"#$)! (!!!.!"#$)! (!!!.!"#$)! !
!".!"!!!.!"!!".!"!!"#.!"!!"#.!"!!"#$.!" !"#.!" =
!"#.!"
= 5.57
Since the duration just calculated is semiannual duration, you dvide the duration by 2 to
make it annual.
Thus the answer is 2.78 years....
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This note was uploaded on 01/11/2014 for the course FIN 201 taught by Professor Pinegar during the Fall '13 term at BYU.
 Fall '13
 Pinegar
 Finance

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