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Compute the coupon amount and price for bond

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Reference no: EM133001249

Consider the following two bonds: Bond A Face value: $100 Annual Coupon rate: 5% Number of payments per year: 2

Term to maturity: 5 years from today

Bond B

Term to maturity: 20 years from today

Face value: $1,000

Annual Coupon rate: 7%

Number of payments per year: 4

  • Compute the coupon amount and price for each bond. The current YTM for each bond is 6%. Then make a table comparing the bond prices when the YTM varies from 1%, 2% ... 17%.
  • Compute duration and modified duration for each bond.
  • Use (modified) duration to estimate the percentage change of price for each bond if the YTM decreases from 6% to 4%.

Reference no: EM133001249

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