Business, 19.12.2019 01:31 marissasabino111
%) on jan 1, 2012, fin307 is considering the newly issued 10-year aaa corporate bond, which is due jan 1, 2022, with a coupon rate of 6% per year paid every 6 months. the bond is traded at par. suppose the market interest rate declines by 100 bps (i. e., 1%), what is the duration and modified duration (before interest rate change) and the effect of the market interest decline on the bond price? hint: if your calculator does not have a build-in function for duration, go to excel and do the calculation manually by setting up 6 columns for t (=1, 2, 3…..20), df(discount factor or 1/pv factor), cf (cashflow), pv (present value of cf=cf*df), w(weight=pv/sum of pv or p0), and t*w. then sum up all t*w, then divide by 2 (because here coupon is paid semiannually).
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%) on jan 1, 2012, fin307 is considering the newly issued 10-year aaa corporate bond, which is due j...
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