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There is a 9%, 23 year note bond which has a ytm of 9%. The...

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Finance

There is a 9%, 23 year note bond which has a ytm of 9%. The ytmalters by one percent down. By how much does the price alter? Ifthe ytm drops by 2%, by how much does the price change?

What is the exact percentage change ofthe bond in the 2 cases?

Please show all work and theformula(s) used.

Answer & Explanation Solved by verified expert
4.0 Ratings (803 Votes)
Given a 9 23 year note bond which has a YTM of 9Modified duration measures percentage change in bond price whenthe YTM changes by 1 percentage point ie if the YTM increasesdecreases by k then the bond price will decrease increase bymodified duration x kThe formula for modified duration isWe know that duration is the weighted average of the times whenbonds coupons are    See Answer
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There is a 9%, 23 year note bond which has a ytm of 9%. The ytmalters by one percent down. By how much does the price alter? Ifthe ytm drops by 2%, by how much does the price change?What is the exact percentage change ofthe bond in the 2 cases?Please show all work and theformula(s) used.

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