Reference no: EM132966447

Question - DEF Corporation Limited bought a bond on January 1 1995. The bond has a coupon rate of 5%, paid quarterly. The company bought the bond at 105. The face value of the bond is $10,000,000.

Required -

1. What is the yield of the bond on January 1 2020?

2. Build the complete amortization table of the bond.

3. Calculate the Macaulay Duration of the bond.

4. Calculate the Modified Duration of the bond.

5. If bond yields were to increase by 50 basis points, by how much (in %) would the bond price change? Use only the duration method.

6. If bond yields were to increase by 50 basis points, by how much (in $) would the bond price change? Use only the duration method.

7. If bond yields were to decrease by 50 basis points, by how much (in %) would the bond price change? Use only the duration method.

8. If bond yield were to decrease by 50 basis points, by how much (in $) would the bond price change? Use only the duration method.

9. Calculate the convexity of the bond.

10. If bond yields were to increase by 50 basis points, by how much (in %) would the bond price change? Use both the duration and convexity.

11. If bond yields were to increase by 50 basis points, by how much (in $) would the bond price change? Use both the duration and convexity.

12. If bond yields were to decrease by 50 basis points, by how much (in %) would the bond price change? Use both the duration and convexity.

13. If bond yield were to decrease by 50 basis points, by how much (in $) would the bond price change? Use both the duration and convexity.