City bank has six-year zero coupon bonds with a total face value of $20 million.The current market yield on the bonds is 10 percent. What is the modified duration of these bonds?

Name: City bank has six-year zero coupon bonds with a total face value of $20 million.The current market yield on the bonds is 10 percent. What is the modified duration of these bonds?
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Quizplus · Accepted Answer

Zero coupon bonds have a duration that is equal to its maturity.
MD = D/(1 + R)= 6/(1.10)= 5.4545.

City Bank Has Six-Year Zero Coupon Bonds with a Total