The following information is for the 5% XYZ bond
Settlement date 3 April 2019
Coupon rate 5%
Redemption date 10 December 2020
Coupon dates 10 June and 10 December
Basis for accrued interest Actual/Actual
YTM 4%
a. Calculate:
i. Days accrued interest (1 mark)
ii. Accrued interest (1 mark)
iii. Dirty (Gross) price of the bond (5 marks)
iv. Clean price of the bond (1 mark)
v. Current yield (1 mark)
vi. $Duration (5 marks)
vii. $Convexity (5 marks)
b. What do the modified duration and convexity of a bond
represent? (4 marks)
c. The price change estimated using modified duration and
convexity may be a poor approximation of actual bond price
change even for small changes in required yield. Discuss.
par value is a 100. you are on the settlement date.
