Calculate duration adjusted for convexity for all bonds

Assignment Help Financial Management
Reference no: EM131521935

Consider four different bonds all having the same yield-to-maturity. Bond A is a consol that pays $50 every period forever and is currently priced at $764:29. Bond B, C and D have the same par value of $1; 000. However, they dier in their maturity and coupon rate. While bond B and C have a maturity of 5 years, bond D has a maturity of 8 years. Also, bond B and D have a coupon rate of 5% whereas bond C has a coupon rate of 7:5%.

(a) Calculate the prices for bond B, C and D.

(b) Calculate the duration for all bonds.

(c) Calculate the duration adjusted for convexity for all bonds.

(d) Suppose the yield-to-maturity increases by 1%. Calculate the price changes on the individual bonds based on the two duration measure and based directly on the pricing formula. Compare your answers.

(e) Suppose the yield-to-maturity decreases by 1%. Calculate the price changes on the individual bonds based on the two duration measure and based directly on the pricing formula. Compare your answers.

Reference no: EM131521935

Questions Cloud

Spouses estates and defer paying estate taxes : Clients who want to avoid paying estate taxes in both spouses' estates and defer paying estate taxes
Evaluate the efficacy of major types of health clinical : Evaluate the efficacy of major types of health clinical outcomes one can use in economic evaluation analysis
Research the terms human overpopulation : Go to the internet and research the terms human overpopulation, human underpopulation, look for how these terms affect the ecosystem and the human condition.
Strategic methods that used to improve employee productivity : Research information on high-performance organizations and provide 5 strategic methods that could be used to improve employee productivity
Calculate duration adjusted for convexity for all bonds : Consider four different bonds all having the same yield-to-maturity. Calculate the duration adjusted for convexity for all bonds.
Explain the meanings of your findings in the given area : Discuss the meanings of your findings in this area. Was your hypothesis accepted or rejected, and how were you able to determine this?
Determine which model would be best suited for efficiency : Identify two (2) types of staffing models that could apply to your chosen scenario and determine which model would be best suited for efficiency
Decision to withhold further credit : Was his company really in trouble? Could the bank be right in its decision to withhold further credit?
Does the idea belong to the letter : Does the idea belong to the letter? Have a wide range of interesting ideas been developed for each letter?

Reviews

Write a Review

Financial Management Questions & Answers

  Foreign company acquisition

Acquisition by a foreign company and the effects of that decision and the results of foreign exchange in Euro and the exchange rate differences.

  Financial management for profit and non profit organizations

In this essay, we are going to discuss the issues of financial management in a non-profit organisation.

  Method for estimating a venture''s value

Evaluate venture's present value, cash and surplus cash and basic venture capital.

  Replacement analysis

This document show the Replacement Analysis of modling machine. Is replacement give profit to company or not?

  Business finance task - capital budgeting

Your company is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique.

  Analysis of the investment

In this project, you will focus on one of these: the additional cost resulting from the purchase of an apple press (a piece of equipment required to manufacture apple juice).

  Conduct a what-if analysis

Review the readings and media for this unit, including the Anthony's Orchard case study media. Familiarise yourself with the Anthony's Orchard company and its current situation.

  Determine operational expenditures

Organisations' behaviour is guided by financial data. In the short term, such data will help determine operational expenditures; in the long term, historical data may help generate forecasts aimed at determining strategic plans. In both instances.

  Personal financial management

How much will you have left over each half year if you adopt the latter course of action?

  Sources of finance for expansion into new foreign markets

A quoted company is considering several long-term sources of finance for expansion into new foreign markets.

  Long term financial planning

This assignment is designed for analyze Long term financial planning begins with the sales forecast and the key input in the long term fincial planning.

  Explain the role of fincial manager

This assignment explain the role of fincial manager, function of manger. And what are the motives of financial manager.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd