The approximate change in the value of the bond portfolio

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1. Bond A pays 12% coupon annually, has a par value of $1,000 and will mature in 3 years. Using a 10% discount rate (Yield-to-Maturity), what is the value of the bond?

2. Using your information on Bond A above, calculate the (Macaulay) duration of the bond.

3. What is the (Macaulay) duration of a bond with the following characteristics: N = 5, PMT = 90, FV = 1000, I/Y = 12%?

4. What is the duration of a bond with the following characteristics: N = 5, PMT = 10, FV = 1000, I/Y = 12%?

5. The modified duration of a bond is 9.27 Years. What is the approximate change in the value of the bond if interest rates drop by 3 percentage points (3%)?

6. A bond portfolio has a (Macaulay) duration of 7.23 years. Using a yield-to-maturity of 18%, what is the approximate change in the value of the bond portfolio if interest rates increase by 5%?

Reference no: EM131974602

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