Assume a bond with a $1,000 par value and an 11 percent coupon rate, two years remaining to maturity, and a 10 percent yield to maturity. The modified duration of this bond is

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The modified duration of a bond is a measure of its price sensitivity to changes in interest rates. It is calculated as the weighted average of the times to maturity of the bond's cash flows, with the weights being the present values of the cash flows. In this case, the bond has a par value of $1,000, an 11 percent coupon rate, two years remaining to maturity, and a 10 percent yield to maturity. Using these values, we can calculate the modified duration of the bond as follows:Modified duration = (PV1 / V) * (T1) + (PV2 / V) * (T2) + ... + (PVn / V) * (Tn)where:PV1, PV2, ..., PVn are the present values of the bond's cash flowsV is the present value of the bondT1, T2, ..., Tn are the times to maturity of the bond's cash flowsIn this case, the bond's cash flows are the annual coupon payments of $110 and the final payment of $1,110 at maturity. The present value of the bond is $1,000. The times to maturity of the bond's cash flows are one year and two years. Using these values, we can calculate the modified duration of the bond as follows:Modified duration = (110 / 1,000) * (1) + (1,110 / 1,000) * (2) = 1.73 yearsTherefore, the modified duration of the bond is 1.73 years.

Assume a Bond with a $1,000 Par Value and an 11