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A 7% semi-annual coupon bond settles 12/11/15 at 105.00 (clean price). Bond maturity is 12/31/25. For a 300 basis points increase in yield, assuming a 30/360-day count convention, what is the new (dirty) price predicted by using modified duration?

Respuesta :

Answer:

Dirty price will be $108.13

Explanation:

We have given last coupon date: Jun 30, 2015

Settlement date: Dec 11, 2015

Next coupon date: Dec 31, 2015

Days elapsed since last coupon payment will be equal to [tex]30\times 5+11=161days[/tex]

Each coupon amount = [tex]100\times \frac{0.07}{2}=$3.50[/tex]

We have to find the dirty price

Dirty price = clean price + accrual interest

So dirty price will be [tex]=105+3.5\times \frac{161}{180}=$108.13[/tex]

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