Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. 4. a) compute the modified duration of a 10% coupo

4. a) Compute the modified duration of a 10% coupon, 4-year corporate bond with a yield...

70.2K

Verified Solution

Question

Finance

4. a) Compute the modified duration of a 10% coupon, 4-yearcorporate bond with a yield to maturity of 8%. b) Using themodified duration, If the market yield drops by 25 basis points,there will be a __________% (increase/decrease) in the bond'sprice.

Answer & Explanation Solved by verified expert
4.4 Ratings (736 Votes)
To calculate Modified duration we first need to calculateMacaulay durationLets assume that the par value of the bond is 100 so 10 couponwill be 10CF in year 4 coupon par value 10100110YTM 8 we discount all the coupons and principal payments totime 0 using YTM as the discount rateNext we multiply    See Answer
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!
Become a Member

Transcribed Image Text

4. a) Compute the modified duration of a 10% coupon, 4-yearcorporate bond with a yield to maturity of 8%. b) Using themodified duration, If the market yield drops by 25 basis points,there will be a __________% (increase/decrease) in the bond'sprice.

Other questions asked by students

Q

3.Tremaine would like to organize UTA as either an S Corporationor a C corporation....3.Tremaine...

Accounting
Q

Andretti Company has a single product called a Dak. The company normally produces and sells 120,000...

Accounting
Q

Examine the following pedigree chart of color blindness In humans color blindness is caused by...

Biology
Q

Replacement of Ser with Thr QUESTION 10 Which one of the following statements A D...

Biology
Q

In the diagram below of triangle IJK, L is the midpoint of IK and M...

Basic Math
Q

1 point Assignment 6 Problem 4 Find the volume of the solid obtained by rotating...

Calculus
Q

One of the zeros of the polynomial function is 5 f x x 4x 21x...

Algebra
Q

Che 1. 8 3 7 2 6 53:40...

Accounting
Q

D.Maxim Company incurred $40,000 of fixed cost and $30,000 of variable cost when 2,000 units...

Accounting
Q

Silk Corporation wants to find an equation to estimate some of their monthly operating costs...

Accounting
Q

The operating expense section of an income statement for a wholesaler would not include: a....

Accounting
Q

Question list The tables show the (approximate) distributions of income in the Question 51 Question...

Accounting