4. Consider the following data on two government bonds that pay interest semi-annually on $100...
60.1K
Verified Solution
Link Copied!
Question
Finance
4. Consider the following data on two government bonds that pay interest semi-annually on $100 face value. Bond A Bond B Coupon 8% 9% Yield to maturity 8% 8% Maturity (years) 2 5 a. Calculate the price for each bond. [10 marks] b. Compute the Macaulay durations for the two bonds. [10 marks] C. Compute the modified duration for the two bonds. Suppose that the yields increased by 20 basis points, compute the approximate price for bonds A and B. Recalculate the bond's new price based on 8.2% per annum yield to maturity. [20 marks] d. Due to financial distress, the bonds of A and B have been downgraded by Fitch from A- to BBB+. What is the predicted effect on the on the bond's price? What is the predicted effect on the bonds' yield to maturity? [Word Limit: 100 words] [10 marks]
Answer & Explanation
Solved by verified expert
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: Flex AI - Your personal assistant for all your inquiries!
