Estimate the two-year key rate durations

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Reference no: EM132004182

Estimate the 2-year, 5-year, and 10-year key rate durations of a 20-year bond carrying a coupon of 14.6 percent on face value $100 paid semi-annually. The given term structure starts with 10.3 percent spot rate of interest at time zero and rises at a rate of 0.002 (.2%) per half year thereafter. Take a 20 basis point (.002) move in each key interest rate to calculate the key rate durations. Report answers for the following:

Current fair price of the bond with the given term structure.

Price change needed to calculate 2-year key rate duration.

Price change needed to calculate 5-year key rate duration.

Price change needed to calculate 10-year key rate duration.

2-year key rate duration.

5-year key rate duration.

10-year key rate duration.

Reference no: EM132004182

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