A bond matures in 30 years, has a 20 year duration and a yield to maturity of 9.32%.The change in the level of the market interest rate is 0.47%.The modified duration is

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Quizplus · Accepted Answer

The modified duration is calculated using the formula: Modified Duration = Macaulay Duration / (1 + Yield to Maturity). Here, Macaulay Duration is 20 years and Yield to Maturity is 9.32% or 0.0932. Therefore, Modified Duration = 20 / (1 + 0.0932) = 18.29 years.

A Bond Matures in 30 Years, Has a 20 Year