An 8%, 30-year corporate bond was recently being priced to yield 10%. The Macaulay duration for the bond is 10.20 years. Given this information, the bond's modified duration would be

Question

Quizplus · Accepted Answer

The modified duration is calculated as the Macaulay duration divided by (1 + (yield/number of coupon periods per year)). Assuming semi-annual coupon payments, the calculation is 10.20 / (1 + (0.10/2)) = 10.20 / 1.05 = 9.27.

An 8%, 30-Year Corporate Bond Was Recently Being Priced to Yield