Bond P is a premium bond with an 6.8 percent coupon, a YTM of 5.55 percent, and
ID: 2769021 • Letter: B
Question
Bond P is a premium bond with an 6.8 percent coupon, a YTM of 5.55 percent, and 15 years to maturity. Bond D is a discount bond with an 6.8 percent coupon, a YTM of 8.55 percent, and also 15 years to maturity. If interest rates remain unchanged, what do you expect the price of these bonds to be 1 year from now? In 5 years? In 10 years? In 14 years? In 15 years? (Input all amounts as positive values. Do not round intermediate calculations. Round your answers to 2 decimal places. Omit the "$" sign in your response.)
What is the Macaulay duration of a 7.8 percent coupon bond with eight years to maturity and a current price of $1,034.50? What is the modified duration? (Do not round intermediate calculations. Round your answers to 3 decimal places.)
Bond P is a premium bond with an 6.8 percent coupon, a YTM of 5.55 percent, and 15 years to maturity. Bond D is a discount bond with an 6.8 percent coupon, a YTM of 8.55 percent, and also 15 years to maturity. If interest rates remain unchanged, what do you expect the price of these bonds to be 1 year from now? In 5 years? In 10 years? In 14 years? In 15 years? (Input all amounts as positive values. Do not round intermediate calculations. Round your answers to 2 decimal places. Omit the "$" sign in your response.)
Explanation / Answer
Coupon 68 FV 1000 Bond P(5.55% YTM) Bond D(8.55% YTM) 1 year 1011.84 983.87 5 years 1053.3 931.12 10 years 1093.99 885.43 14 years 1119.49 860.22 15 years 1125.05 855.11 B FV 1000 PV 1034.5 Coupon 78 N 8 YTM 7.22% Year 0 1 2 3 4 5 6 7 8 CF 78 78 78 78 78 78 78 1078 DCF 72.74762171 67.84893 63.28011 59.01894 55.04471 51.3381 47.88108 617.1807 DCF*PERIOD 72.74762171 135.6979 189.8403 236.0758 275.2236 308.0286 335.1676 4937.446 Macaulys duration 6.273781 Duration is sum of DCF*PERIOD/Price Modified duration is maculys duration/(1+yield) 5.851316397 years