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Calculate the modified duration of bond

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Reference no: EM132828259

Consider a 9.5 year bond with a 4% coupon payable on a semi-annual basis.

a) If "par" bonds of comparable maturity and credit quality are currently yielding 3.20%, what is the approximate price of this 4% bond (assume par is $1,000)?

b) Using a financial calculator, calculate the modified duration of this bond.

c) If you were managing a $500 million bond portfolio with a modified duration of 7 years and wanted to hedge 20% of your portfolio using this 4% bond, how many bonds would you short to achieve this result?

Reference no: EM132828259

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