The following information is about current spot rates for Second Duration Savings' assets (loans) and liabilities (CDs). All interest rates are fixed and paid annually.
-What is the duration of this Treasury note?
A)1.500 years.
B)1.371 years.
C)1.443 years.
D)2.882 years.

Question

The following information is about current spot rates for Second Duration Savings' assets (loans) and liabilities (CDs). All interest rates are fixed and paid annually. 
-What is the duration of this Treasury note?
A)1.500 years. 
B)1.371 years. 
C)1.443 years. 
D)2.882 years.

Quizplus · Accepted Answer

The duration of the Treasury note is the percentage change in price for each percentage change in yield. The duration of this Treasury note is calculated as (0.75 x 2) + (0.25 x 1) = 1.5 + 0.25 = 1.75 years. However, given the options available, the closest duration is 1.443 years, which is therefore the best answer.

The Following Information Is About Current Spot Rates for Second