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A three-year bond with a yield of 10% (continuously compounded) pays an 12% coupon at...

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Accounting

  1. A three-year bond with a yield of 10% (continuously compounded) pays an 12% coupon at the end of each year.
    1. Compute the bonds price.
    2. Compute the bonds duration.
    3. Use the duration from part (b) to compute the impact on the bonds price of a 0.2% increase in its yield.
    4. Recompute the bonds price on the basis of a 10.2% per year yield and verify that the result is consistent with your answer in part (c).

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