An 8% semi annual pay, option free corporate bond that is selling at par has ten years to maturity. What is the effective duration of the boind based on a 75 basis point change (up or down) in rates? A. 5.6 B. 6.8 C. 7.2 D. 10.0
V- = 1052.698 V+ = 950.6875 V0 = 1000 (1052.698 - 950.6875)/ 2*1000*0.0075 = 6.8007 = B? - Dinesh S
at 8% – 1000 calculate price at 8.75 and 7.25 plug into formula… for Duration…
B is correct…do you simply enter the numbers in the financial calc to get the price of the bond when the yield changes??