A bond currently has a price of $1,050.The yield on the bond is 6.00%.If the yield increases 25 basis points,the price of the bond will go down to $1,030.The duration of this bond is ____ years.

Question

Quizplus · Accepted Answer

To calculate the duration, we can use the following formula:
Duration = (Change in Bond Price/Initial Bond Price) / Change in Yield
= [(1030-1050)/1050] / (6.25%-6.00%)
= 0.0190 / 0.0025
= 7.60 years
Therefore, the closest choice is B) 8.08 years.

A Bond Currently Has a Price of $1,050