25 bps decrease in interest rate, bond price increases by 1.425% when A bond with a 6 percent semiannual coupon has a 5.7.
Given that,
A bond with a 6 percent semiannual coupon has a 5.7 Macaulay duration and a 7.4 percent yield to maturity. A 25 basis point drop in yield to maturity will result in a ____ percentage price rise for the bond, which has an adjusted duration of .
We have to fill the blank.
We know that,
% increase in bond price = Duration of bond × % change in interest rate
= 5.70×0.25%
= 1.4250%
Therefore, 25 bps decrease in interest rate, bond price increases by 1.425% when A bond with a 6 percent semiannual coupon has a 5.7.
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