FNCE30001 Study Guide - Final Guide: Interest Rate Swap, Yield Curve, Current Yield
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Note: this tutorial has to cover two topics and is therefore longer than usual. It is most unlikely that tutors will be able to cover all questions in class but full answers will be provided on the lms. Problem 1 [question 9 on page 278 of bodie, et al principles of investments] Find the duration of a 6% coupon bond making annual coupon payments if it has three years until maturity and a yield to maturity of 6%. What is the duration if the yield to maturity is. Consider a 7-year 12% coupon bond, with a par value of , and which has just paid a coupon. The yield curve is flat at 9. 25% pa. coupons are paid annually. Use the duration to make a first approximation of the percentage capital gain or loss if the yield increases by 25 basis points.