REL 394 – Calculate the duration of the following bonds

Subject: General Questions    / General General
Question

Using Excel, calculate the duration of the following bonds. Assume all have a face value of $100 and a 7% yield to maturity.

10. A 5 -year zero coupon note: (a) 7 years; (b) 4.2 years; (c) 5 years; (d) 0 years;

11. A 7 -year bond with coupon of 4.0%: (a) 4.57 years; (b) 5.32 years; (c) 0 years; (d) 6.16 years;

12. A 10 -year bond with coupon of 9.0% : (a) 10 years; (b) 7.2 years; (c) 0 years; (d) 5.9 years;

Assume you hold a bond portfolio with an average yield to maturity of 5% and a duration of 5 years.

13. What would be the effect of a 100 basis point reduction in yields on the value of the bond portfolio: (a) +5.0%; (b) -100%; (c) +4.76%; (d) -5.0%;

14. What new yield to maturity would make the portfolio lose half its value: (a) 5.5%; (b) 15.5%; (c) 4%; (d) 50%;