Consider the following two-bond portfolio of option-free bonds; Bond A Bond B Years to maturity 5 years 10 years Coupon rate 5% 5% Par value 1000 1000 Yield to maturity 8% 6% Par amount owned R3,45...



  • Consider the following two-bond portfolio of option-free bonds;











































Bond A



Bond B



Years to maturity



5 years



10 years



Coupon rate



5%



5%



Par value



1000



1000



Yield to maturity



8%



6%



Par amount owned



R3,45 million



R2 million



Market value



R30 367.59(in 000’s)



R18 528(in 000’s)




  1. Assuming that Bond A is an option-free bond, calculate the bond’s modified duration using Macauly’s Duration.



Jun 09, 2022
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