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2. The following table shows four bonds, their coupon rates and their prices before and after an interest rate

 

 

 

rise of 1 basis point (0.01%) this morning. The columns with maturity and duration information in

 

the table were erroneously erased. Assume that the yield curve is flat (i.e. yields are the same for all

 

bonds) and use annual compounding throughout. All bonds have face values of $1000. The only

 

thing you remember about the last two columns is that all bonds have the same number of years to

 

maturity. Your task is to fill in the last two columns with the correct information.

 

 

Bond Coupon Price – before Price – after

 

Time to

 

Maturity

 

Duration

 

 

 

 

1 14% $1245.78 $1245.06

 

2 10% $1000.00 $999.39

 

3 7% $815.66 $815.13

 

4 0% $385.54 $385.19

 

  • 9 years ago
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