Third Duration Investments has the following assets and liabilities on its balance sheet. The two-year Treasury notes are zero coupon assets. Interest payments on all other assets and liabilities occur at maturity. Assume 360 days in a year.
-Using present value bond valuation techniques,calculate the exact price of the bond after the interest rate increase of 20 basis points.
A)$1,007.94.
B)$992.02.
C)$992.06.
D)$996.01.

Question

Third Duration Investments has the following assets and liabilities on its balance sheet. The two-year Treasury notes are zero coupon assets. Interest payments on all other assets and liabilities occur at maturity. Assume 360 days in a year.  
-Using present value bond valuation techniques,calculate the exact price of the bond after the interest rate increase of 20 basis points.
A)$1,007.94. 
B)$992.02. 
C)$992.06. 
D)$996.01.

Quizplus · Accepted Answer

∆P = 922.06 - 1,000 = -$7.94
 Compare to duration estimate of change -$7.985.

Third Duration Investments Has the Following Assets and Liabilities on Its