A Bond Has a Macaulay Duration of 10

question 36

Multiple Choice

A bond has a Macaulay duration of 10.5 years and a yield to maturity of 6.4 percent. If the bond is currently selling for $964, what is the new bond price if interest rates increase by 0.5 percent?

• A) $920.14
• B) $909.32
• C) $917.21
• D) $914.96
• E) $905.29

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Definitions:

Investigation

The process of inquiring, analyzing, and researching to gather facts and information about a specific subject or activity.

Business Case

A documented argument or rationale for initiating a project or task, outlining the benefits, costs, and risks.

Breakeven Analysis

Breakeven analysis is a financial evaluation to determine the point at which a business, product, or service becomes profitable, balancing costs with revenue.

NPV

Net Present Value, a financial metric that calculates the difference between the present value of cash inflows and outflows over a period of time, used to assess the profitability of an investment.