The duration of a 2 year annual 10% bond that is selling for par is:
A) 1.00 years.
B) 1.91 years.
C) 2.00 years.
D) 2.09 years.
E) None of these.

Question

Quizplus · Accepted Answer

The duration of a bond selling at par is calculated as the weighted average time to receive the bond's cash flows. For a 2-year bond with annual 10% coupon, the duration is less than 2 years due to the present value of the cash flows.

The Duration of a 2 Year Annual 10% Bond That