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You own a fixed income asset with a MaCaulay duration of 5 years. If the level of required yields, which is currently at 8%, goes down by 0.10%, how much do you expect the price of the asset to change (in

1 Answer

4 votes

Answer:

The price of the asset to change (in percentage ) is 0.463%

Step-by-step explanation:

As per given data

Duration = 5 years

Chnage in the yield rate = -0.10%

Price of the asset change can be calculated using following formula

Percentage price change = -Duration x
(Change in the yield rate)/(( 1 + Yield rate))

Placing values in the formula

Percentage price change = -5 years x
(-0.0010)/(( 1 + 0.8))

Percentage price change = 0.00463

Percentage price change = 0.463%

User Youssri Abo Elseod
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