Posted: September 22nd, 2016
An insurance company is analyzing three bonds and is using duration as the measure of interest rate risk. All three bonds trade at a yield to maturity of 10% , have maturity of 5 years and have $10,000 par values. The bonds differ only in the amount of annual coupon interest they pay: 8, 10, and 12%
An insurance company is analyzing three bonds and is using duration as the measure of interest rate risk. All three bonds trade at a yield to maturity of 10% , have maturity of 5 years and have $10,000 par values. The bonds differ only in the amount of annual coupon interest they pay: 8, 10, and 12%
a) What is the duration for each of the bonds?
b) What is the relationship between duration and the amount of coupon interest that is paid?
Expert paper writers are just a few clicks away
Place an order in 3 easy steps. Takes less than 5 mins.