2. You are the portfolio manager of a large company that invests in many securities including corporate bonds. You have been assigned the task of bond portfolio management. You are provided with the following data in relation to bonds: Maturity period 7 years Coupon rate 12% Par value $1,000 Coupons on bonds are paid annually Yield to maturity of bonds 8% Required: i) Calculate the Macualay’s duration, modified duration and convexity ii) Calculate the change in bond price when yield to maturity changes by one percent using modified duration iii) Calculate the change in bond price when yield to maturity changes by one percent when convexity is considered
2. You are the portfolio manager of a large company that invests in many securities including corporate bonds. You have been assigned the task of bond portfolio management. You are provided with the following data in relation to bonds: Maturity period 7 years Coupon rate 12% Par value $1,000 Coupons on bonds are paid annually Yield to maturity of bonds 8% Required: i) Calculate the Macualay’s duration, modified duration and convexity ii) Calculate the change in bond price when yield to maturity changes by one percent using modified duration iii) Calculate the change in bond price when yield to maturity changes by one percent when convexity is considered
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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2. You are the portfolio manager of a large company that invests in many securities including corporate bonds. You have been assigned the task of bond
Maturity period 7 years
Coupon rate 12%
Par value $1,000 Coupons on bonds are paid annually
Yield to maturity of bonds 8%
Required:
i) Calculate the Macualay’s duration, modified duration and convexity
ii) Calculate the change in
iii) Calculate the change in bond price when yield to maturity changes by one percent when convexity is considered
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