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Calculate the dollar price change

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Reference no: EM133070712

Problem:

Face value

$100,000

Maturity 

2 years

Coupon 

8%, paid semi-annually

Yield to maturity

6%

Price

103,717.10

Macaulay duration

1.889 years.

Convexity

17.47

Calculate the dollar price change for this bond assuming its yield to maturity increased by 10 basis points (i.e. from 6% to 6.1%). Identify:

  1.  Modified duration
  2. Modified duration effect (price change calculated using duration formula)
  3. Convexity effect (price change due to convexity)

[Remember to quote "Formula number #" and show your workings by typing in the variable/number that matches the formula]

Reference no: EM133070712

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