A $1,000 par value, 7% annual coupon bond matures in 4 years. The bond is currently priced at $1,034.65 and has a YTM of 6.0%. What is the Macaulay duration?

Question

Quizplus · Accepted Answer

The Macaulay duration is a weighted average time until a bond's cash flows are received, and it considers the present value of these cash flows. Given the bond's details, the correct calculation aligns with the Macaulay duration formula, which incorporates the bond's coupon rate, YTM, face value, and current price. The answer closest to the correct calculation, based on the given options, is 3.63 years. This duration reflects the sensitivity of the bond's price to changes in interest rates, with a longer duration indicating greater sensitivity.

A $1,000 Par Value, 7% Annual Coupon Bond Matures in 4