Question

What is the duration of a bond with four years to maturity and a coupon of 8.9 percent paid annually if the bond sells at par? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., 32.16161.)

Answer 1

If bond sells at par, Yield to maturity = coupon rate = 8.9% Annual coupon amount = At the End of 4th year, Bond matures $ 1000 *8.9% = $89 and receive $1000 + $89=1089 Nڑ لیا present value gear Cash Flow presont value Factor (9.9%) 0.0817264 0:081726 ,8173 0.9183 889 8. 15009 0.075047 75.05 0.84,32 $89 0.20674 68-91 0.068914 0.7743 $ 89 3.09725 774-31 0.774313 $ 1089 0.711 ($1000+ $89) 1000 3.53581 Duration of bond = 3.53581 years)