Calculate the duration of a 4-year $1,000 face value bond, which pays 8% coupons annually throughout maturity and has a yield to maturity of 9%.
A) 3.29 years
B) 3.58 years
C) 3.69 years
D) 3.89 years
E) 4.00 years

Question

Quizplus · Accepted Answer

The duration of a bond is calculated using the formula for Macaulay duration, which considers the present value of the bond's cash flows. Given the bond's coupon rate, face value, and yield to maturity, the duration is approximately 3.58 years.

Calculate the Duration of a 4-Year $1,000 Face Value Bond