Calculate the bond macauley duration

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Bris plc. has just issued a three-year bond with face value £100 and a coupon rate of 5%. Coupons are paid annually. The term structure of interest rates is flat at 3%. Derive the payoff structure of the bond and calculate its price. Calculate the bond's Macauley duration. What does this figure imply for the interest rate sensitivity of the bond? What is the bond's modified duration? Estimate the change in the price of the Bris bond for a 25 basis points upward shift in the term structure.

Reference no: EM132774620

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