Key interest rate to calculate the key rate durations

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Reference no: EM132000828

Estimate the 2-year, 5-year, and 10-year key rate durations of a 20-year bond carrying a coupon of C1 percent on face value $100 paid semi-annually. The given term structure starts with C2 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:

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

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

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

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

5. 2-Year key Rate Duration.

5. 5-Year key Rate Duration.

5. 10-Year key Rate Duration.

C1 = 14.6. C2 = 10.3

Reference no: EM132000828

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