Calculate the duration (measured in six-monthly periods)for a coupon-paying bond maturing in two years,where the bond has a face value of $100 000,yield of 7% p.a.and coupon rate of 9% p.a.Assume interest rates are paid half yearly and the last coupon payment has just been made.

A) $ 3.65 $
B) $ 3.81 $
C) $ 3.48 $
D) $ 3.91 $

Question

Calculate the duration (measured in six-monthly periods) for a coupon-paying bond maturing in two years,where the bond has a face value of $100 000,yield of 7% p.a.and coupon rate of 9% p.a.Assume interest rates are paid half yearly and the last coupon payment has just been made.

A) $ 3.65 $
B) $ 3.81 $
C) $ 3.48 $
D) $ 3.91 $

Quizplus · Accepted Answer

According to equation 6.9,we can determine the duration of the bond.The bond will have periodic cash flows of $4500 for three periods,the last cash flow being $104 500 in period four.The weights of the PV of these cash flows are 0.041,0.039,0.038 and 0.839.Multiplying each by the time period each occurs gives a duration of 3.48.

Calculate the Duration (Measured in Six-Monthly Periods)for a Coupon-Paying Bond 3.65 3.65 3.65

Calculate the Duration (Measured in Six-Monthly Periods)for a Coupon-Paying Bond $3.65$