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You own a fixed income asset with a MaCaulay duration of 5 years. If the level of required yields, which is currently at 8%, goes down by 0.10%, how much do you expect the price of the asset to change (in

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hyderali230

Answer:

The price of the asset to change (in percentage ) is 0.463%

Explanation:

As per given data

Duration = 5 years

Chnage in the yield rate = -0.10%

Price of the asset change can be calculated using following formula

Percentage price change = -Duration x [tex]\frac{Change in the yield rate}{( 1 + Yield rate)}[/tex]

Placing values in the formula

Percentage price change = -5 years x [tex]\frac{-0.0010}{( 1 + 0.8)}[/tex]

Percentage price change = 0.00463

Percentage price change = 0.463%

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