Question

A bond has a Macaulay duration of 6.25 years. What will be the percentage change in the bond price if the yield to maturity increases from 6 percent to 6.4 percent?

Answer 1

-0.0242

Step-by-step explanation:

Percentage change in bond price = -6.25*(0.064 - 0.06) / 1 + (0.06/2)

= -6.25 * 0.004 / 1+0.03

= -6.25 * 0.004/1.03

= -0.0242

= -2.42

Thus, the percentage change in the bond price -2.42%