The duration of a par value bond with a coupon rate of 7% and a remaining time to maturity of 3 years is

Question

Quizplus · Accepted Answer

The duration of a par value bond with a coupon rate of 7% and a remaining time to maturity of 3 years can be calculated using the following formula: Duration = (1 + r)/(1 + r*y) * (1 - 1/(1 + r)^n) + n/(1 + r)^n * y.

Where r is the discount rate (which we assume is equal to the coupon rate of 7%), y is the annual yield, and n is the remaining time to maturity in years.

Plugging in the values, we get:
Duration = (1.07)/(1 + 0.07*1) * (1 - 1/(1 + 0.07)^3) + 3/(1 + 0.07)^3 * 1
Duration = 2.81 years

Therefore, the best choice is C

The Duration of a Par Value Bond with a Coupon