Calculate the value and the modified duration

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Reference no: EM132567654

Butchery Withoutbones issued the following bond:

Amount: € 125m

Issue price: 99.731%

Date of issue: 20 February 2014

Settlement date: 20 February 2014

Maturity: 7 years

Annual coupon: 5.5%, i.e. in one instalment on 20 February of each year, with the first payment on 20 February 2015. Normal redemption date: The bonds will be redeemed in full on 20 February 2021 at par value.

Question (a) Calculate the yield to maturity of the bond on issue, its modified duration and its duration.

Question (b) On 21 February 2015, the yield to maturity on bonds comparable to the Butchery Withoutbones bond is 5%. Calculate the value, the modified duration and the duration on this date of the Butchery Withoutbones bond. What are your comments compared to previous results.

Reference no: EM132567654

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