Exhibit 18.1
Use the Information Below for the Following Problem(S)
A $1000 par value bond with 5 years to maturity and a 6% coupon has a yield to maturity of 8%. Interest is paid semiannually.
-Refer to Exhibit 18.1.Calculate the Macaulay duration for the bond.
A) 4.19 years
B) 4.36 years
C) 8.72 years
D) 8.38 years
E) 9.52 years

Question

Quizplus · Accepted Answer

The present value of the weighted cash flows = $8015.41 =
30/(1.04)+ 60/(1.04)² + 90/(1.04)³ + 120/(1.04)⁴+150/(1.04)⁵
+ 180/(1.04)⁶ + 210/(1.04)⁷ + 240/(1.04)⁸ + 270/(1.04)⁹ + 10300/(1.04)¹⁰
Macaulay duration = 8015.41/918.89 = 8.72
Or 8.72/2 = 4.36 years

Exhibit 18.1 Use the Information Below for the Following Problem(S)