The duration of a par-value bond with a coupon rate of 8% (paid semi-annually) and a...

Question

Question

The duration of a par-value bond with a coupon rate of 8% (paid semi-annually) and a remaining time to maturity of 5 years is closest to

a.

5 years

b.

4.6 years

c.

4.2 years

d.

4.0 years

e.

3.7 years

Answer 1

Answer #1

Period Cash Flow Present value factor Present value Weight (w) * |1/ (1+R)An Present value / $1,000 0.038461538 0.5 40 0.9615

So, duration of bond is closest to 4.2 years

Option 'C' is correct

Answer 2

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