Estimate the current price of the michigan bond

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Reference no: EM131444320

You bought EMU bond: 5-year, coupon= 12%, paid semi-annually, par= $1,000, and YTM = 8% Durration= 3.34

If the YTM of Michigan Bond changes immediately upon purchase to 7.90%:

a. Estimate the current price of the Michigan bond using modified duration relationship

b. Estimate your wealth at the end of 4-years, if you sold the bond then, and have been reinvesting the coupon payments all along at the same 7.90% YTM rate.

Reference no: EM131444320

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