Questions from General Investment

Q: You’ve just found a 10 percent coupon bond on the market that

You’ve just found a 10 percent coupon bond on the market that sells for par value. What is the maturity on this bond?

Q: Mr. Spice asks Mr. Myers to quantify the value changes

Mr. Spice asks Mr. Myers to quantify the value changes from changes in interest rates. To illustrate, Mr. Myers computes the value change for the fixed-rate note. He assumes an increase in interest ra...

Q: What is the Macaulay duration of a 7 percent coupon bond with

What is the Macaulay duration of a 7 percent coupon bond with five years to maturity and a current price of $1,025.30? What is the modified duration?

Q: In Problem 23, suppose the yield on the bond suddenly increases

In Problem 23, suppose the yield on the bond suddenly increases by 2 percent. Use duration to estimate the new price of the bond. Compare your answer to the new bond price calculated from the usual bo...

Q: What is the dollar value of an 01 for the bond in

What is the dollar value of an 01 for the bond in Problem 23? Data from Problem 23: What is the Macaulay duration of a 7 percent coupon bond with five years to maturity and a current price of $1,025...

Q: A bond with a coupon rate of 8 percent sells at a

A bond with a coupon rate of 8 percent sells at a yield to maturity of 9 percent. If the bond matures in 10 years, what is the Macaulay duration of the bond? What is the modified duration?

Q: Assume the bond in Problem 27 has a yield to maturity of

Assume the bond in Problem 27 has a yield to maturity of 7 percent. What is the Macaulay duration now? What does this tell you about the relationship between duration and yield to maturity? Data from...

Q: You find a bond with 19 years until maturity that has a

You find a bond with 19 years until maturity that has a coupon rate of 8 percent and a yield to maturity of 7 percent. What is the Macaulay duration? The modified duration?

Q: One method used to obtain an estimate of the term structure of

One method used to obtain an estimate of the term structure of interest rates is called bootstrapping. Suppose you have a one-year zero coupon bond with a rate of r1 and a two-year bond with an annual...

Q: You find that the one-, two-, three-, and four

You find that the one-, two-, three-, and four-year interest rates are 4.2 percent, 4.5 percent, 4.9 percent, and 5.1 percent. What is the yield to maturity of a four year bond with an annual coupon r...