MLK Bank has an asset portfolio that consists of $90 million of 30-year, 9 percent annual coupon, $1,000 bonds that sell at par. a-1. What will be the bonds’ new prices if market yields change immediately by ± 0.10 percent? a-2. What will be the new prices if market yields change immediately by ± 2.00 percent? b-1. The duration of these bonds is 11.1983 years. What are the predicted bond prices in each of the four cases using the duration rule? b-2. What is the amount of error between the duration prediction and the actual market values?

MLK Bank has an asset portfolio that consists of $90 million of 30-year, 9 percent annual coupon, $1,000 bonds that sell at par. a-1. What will be the bonds’ new prices if market yields change immediately by ± 0.10 percent? a-2. What will be the new prices if market yields change immediately by ± 2.00 percent? b-1. The duration of these bonds is 11.1983 years. What are the predicted bond prices in each of the four cases using the duration rule? b-2. What is the amount of error between the duration prediction and the actual market values?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 9P

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