Investments and Analysis & Essays

Investments and Analysis & Essays
1. We have the Hargrove par bond paying a coupon rate of 8% and having a maturity of 20 years. If the coupon rate were to alter to 4%, what would the new duration be? Under what circumstances would duration equal maturity?

2. We have the Fitzpatrick bond which has a convexity of 30, a duration of 4, a ytm of 12% and a maturity of 25 years. The central bank is injecting huge liquidity , and there is no fear of inflation. If the yields alter by 100 basis points, what would the price change be? If the yields were to alter by 200 basis points, what would be the new change?

ESSAYS

1.Explicate the meaning of duration. Ascertain that you include its definition and its uses.

Under what circumstances is it an insufficient tool?

2. Expound on the determinants of duration.

3. Talk about convexity. Define it and discuss under what circumstances it is usefull. Also, analyze how it is used in money management.
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