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Calculate the new price of the bond

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Reference no: EM133110361

settlement

11/19/2021

Maturity

11/19/2026

Yield to Maturity

Coupon

Principal

 

3.00%

3.50%

 $100 

 

Compounding Freq

2.0

 

 

  1. For the same bond above, calculate
    1. the prices of the bond assuming 1) the yield to maturity of the bond goes up 0.01% (price here called P_1) and 2) the yield to maturity of the bond goes down 0.01% (price here called P_2)
    2. the duration of the bond by using the formula D = -(P_1 - P2)/P_0/dy, with P_1 and P_2 from step a. and P_0 the price from step 2 of Prob #1 above. Dy is the difference in yield when calculating P_1 an P_2
    3. Calculate the duration of the bond using the MDuration function in Excel and verify you get the same number as in step b

For the same bond in probl#1, assuming the new yield of the bond one year from today is 4%. Perform the following calculations: (5 points)

  1. Calculate the new price of the bond, using the Price function in Excel. (Ignore the fact one year later this bond is only a four year bond)
  2. Calculate the price return of the bond and the income of the bond (using original YTM)
  3. Calculate the 1 year total return of the bond

Reference no: EM133110361

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