Business, 03.04.2021 05:50 Blut07ilove

Philip Morris has issued bonds that pay semiannually with the following characteristics: Coupon Yield to Maturity Maturity Macaulay Duration
8% 8% 15 years 10 years

Required:
a. Calculate modified duration using the preceding information.
b. Explain why modified duration is a better measure than maturity when calculating the bondâs sensitivity to changes in interest rates.
c. Identify the direction of change in modified duration if

1. the coupon of the bond were 4 percent, not 8 percent.
2. the maturity of the bond were 7 years, not 15 years.

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Philip Morris has issued bonds that pay semiannually with the following characteristics: Coupon Yie...

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