Business Case Data and Assumptions
· 15 Year Bond
· Face Value = $10,000
· 6% Coupon Rate
· Current Interest Rate = 4%
Business Case Requirements
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25% |
Using Excel, build a DURATION spreadsheet, and calculate the DURATION of the bond at 6%. |
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25% |
Then calculate the DURATION of the bond at the current interest rate of 4%. |
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10% |
Define, in your own words, the definition of DURATION. Why does the duration of the bond change at 4%? |
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20% |
Calculate the approximate percentage change in the price of the bond at 4%. Please show your work. |
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10% |
Explain the relationship between duration and interest rate risk. |
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10% |
Professional Formatting |
Submission Requirements
· All work must be done in Excel.
· Do not forget your name.
· Professional Formatting is expected.
· When in doubt, replicate the logic and formatting of examples in the textbook.
· Answer all questions. You may cut and paste a text box from Word.
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