Assume the price of a coupon bond is $650. Further assume that if the yield is increased by 50 basis points, then the price would be $620 and if the yield is decreased by 50 basis points, then the price would be $700. What is the duration?

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Quizplus · Accepted Answer

Duration is calculated using the formula: Duration = (Price if yield decreases - Price if yield increases) / (2 * Initial Price * Change in yield). Here, Duration = (700 - 620) / (2 * 650 * 0.005) = 12.3.

Assume the Price of a Coupon Bond Is $650