Business, 18.03.2021 01:20 angelbabynn05

You have a 2 year coupon bond with a coupon rate of 6 percent and a yield-to-maturity of 6.5 (continuously compounded). a. Compute the theoretical bond price. (Hint: Instead of using zero (spot) rate, use the yield to maturity) b. Compute the duration and convexity. c. Compute the new bond price when the yield to maturity moves up 10 basis points. d. Approximately compute the new bond price using only the obtained duration. (Hint: ΔP = − ⋅ Δy) 2 e. Approximately compute the new bond price with the duration and convexity. (Hint: ΔP = −P ⋅ ⋅ Δy + 1 2 P ⋅ ⋅ (Δy)

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You have a 2 year coupon bond with a coupon rate of 6 percent and a yield-to-maturity of 6.5 (contin...