The Arnold National Bank has a bond portfolio that consists of bonds with 5 years to maturity and a 9 percent coupon rate having a face value of $1,000.These bonds are selling in the market for $1,126.Coupon payments are made annually on this bond.
What is duration of these bonds?
A)3.77 years
B)4.23 years
C)5 years
D)9 years
E)None of the options is correct.

Question

Quizplus · Accepted Answer

The duration of a bond is calculated using the formula that considers the present value of cash flows, which includes annual coupon payments and the face value at maturity. Given the bond's coupon rate, market price, and time to maturity, the duration is approximately 4.23 years.

The Arnold National Bank Has a Bond Portfolio That Consists