Bond X is a 4% coupon (paid semi-annually), 3-year bond with a face value of...
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Bond X is a 4% coupon (paid semi-annually), 3-year bond with a face value of $100. Bond Y is a 6% coupon (paid semi-annually), 3-year bond with a face value of $100. Bond Z is a 8% coupon (paid semi-annually), 4-years to maturity and a face value of $100 per contract. The yield curve is flat at 7% per annum. i) Compute the current price of bond X. (2 marks) ii) Compute the new price of bond X if the yield curve falls to 5% and if the yield curve jumps to 9%. (2 marks) iii) Compute the current price of bond Y. (2 marks) iv) Compute the new price of bond Y if the yield curve falls to 6%. What is the percentage price change? (3 marks) v) Compute bond Zs Macaulay Duration. (3 marks) vi) Compute bond Zs Modified Dollar Duration. (3 marks)
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