The Sheets Savings and Loan Association has purchased a bond that has a coupon rate of 7.5% and a face value of $1000.It has 5 years to maturity and is currently selling in the market for $1063.The bond makes annual coupon payments.What is the duration of this bond?

Question

Quizplus · Accepted Answer

To calculate duration, we need to sum up the present value of each coupon payment and the face value, weighted by the time each payment is received, then divide by the price of the bond. Using a financial calculator, we get the duration to be 4.37 years.

The Sheets Savings and Loan Association Has Purchased a Bond