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You have discovered that when the required rate of return on a bond you own fell by 0.5 percent from 9.6 percent to 9.1 percent, the fair present value rose from $940 to $965. The bond pays interest annually. What is the duration of this bond? Assume annual payments. (Do not round intermediate calculations. Round your answer to 1 decimal place. (e.g., 32.1)) Duration of this bond 5.76 years

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Answer #1

-Duration = (Change in price/Price) / [Change in rate / (1+rate)]

=(965-940)/940 / [-0.005/(1+0.096)]

=25/940 / [-0.005/1.096]

=0.026595 / -0.004562

- Duration = - 5.83 years

Thus Duration = 5.83 years

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