Assume you currently hold a one-year bond with a face value of $100 000,which has a coupon rate of 8% p.a.If the yield changes from 12% p.a.to 14% p.a. ,what is the change in the duration of the bond?

A) $ -0.001 $
B) $ 0.001 $
C) $ -0.010 $
D) $ 0.004 $

Question

Assume you currently hold a one-year bond with a face value of $100 000,which has a coupon rate of 8% p.a.If the yield changes from 12% p.a.to 14% p.a. ,what is the change in the duration of the bond?

A) $ -0.001 $
B) $ 0.001 $
C) $ -0.010 $
D) $ 0.004 $

Quizplus · Accepted Answer

The present value (PV)of the first cash flow = 1.961.Applying the same procedure to the new yield of 14% gives a duration of 1.960.Hence,the duration changes by 1.960 - 1.961 = -0.001.

Assume You Currently Hold a One-Year Bond with a Face −0.001 -0.001 −0.001

Assume You Currently Hold a One-Year Bond with a Face $-0.001$