A 10% coupon corporate bond maturing in 2 years is selling at $1,040. What is the...

Question

Question

A 10% coupon corporate bond maturing in 2 years is selling at $1,040. What is the duration of this bond?

A. 1.812 years.

B. 1.836 years.

C. 1.909 years.

D. 1.911 years.

Answer 1

Answer #1

IRR is the Rate at which PV of Cash Inflows are equal to Bond Price

IRR = Rate at which least +ve NPV + [ NPV at that rate / Change in NPV due to 1% inc in disc rate ] * 1%

= 7% + [ 14.24 / 18.58 ] * 1%

= 7% + 0.77%

= 7.77%

Duration:

Duration is the period in which bond value is recovered after considering the time value of money.

OPtion D is correct.

Add a comment

Answer 2

Similar Homework Help Questions

A corporate bond maturing in 15 years with a coupon rate of 7.9 percent was purchased...

A corporate bond maturing in 15 years with a coupon rate of 7.9 percent was purchased for $950 and it now selling for $980. What will be its selling price in two years if comparable market interest rates drop 1.9 percentage points? (Hint: Use Appendix A-2 and Appendix A-4 or the Garman/Forgue companion website.) Round Present Value of a Single Amount and Present Value of Series of Equal Amounts in intermediate calculations to four decimal places. Calculate the bond's YTM...
You have a bond at par value with a coupon of 7% maturing in 10 years....

You have a bond at par value with a coupon of 7% maturing in 10 years. Coupons are paid annually. The new bonds of similar credit worthiness are now paying a 7.5% coupon. What is the new value of the bond.
What is the duration of a 10-year bond, selling for $877.11, with an 8% annual coupon?...

What is the duration of a 10-year bond, selling for $877.11, with an 8% annual coupon? a. 7.62 b.7.33 c.7.04 d. 6.95

#10 a. What is the duration of a zero-coupon bond that has seven years to maturity?...

#10 a. What is the duration of a zero-coupon bond that has seven years to maturity? b. What is the duration if the maturity increases to 9 years? c. What is the duration if the maturity increases to 11 years? points years eBook a. Duration of the bond b. Duration of the bond c. Duration of the bond years years Print References
Question 20 1 pts What is the Macaulay duration of a zero-coupon bond maturing in 12...

Question 20 1 pts What is the Macaulay duration of a zero-coupon bond maturing in 12 years if its yield to maturity is 7 percent? 12.00 11.21 11.59
Question 20 1 pts What is the Macaulay duration of a zero-coupon bond maturing in 12...

Question 20 1 pts What is the Macaulay duration of a zero-coupon bond maturing in 12 years if its yield to maturity is 7 percent? O 12.00 O 11.21 O 11.59

A bond maturing in 7 years has a yield to maturity of 3.4%, an annual coupon...

A bond maturing in 7 years has a yield to maturity of 3.4%, an annual coupon rate of 4% paid biannually, and a face value of $10,000. What is the value today? A. 9,937.77 B. 10,998.32 C. 9,818.10 D. 9,735.42 E. 10,370.97
22. A zero coupon bond is selling at a deep discount price of $430.00. It matures...

22. A zero coupon bond is selling at a deep discount price of $430.00. It matures in 13 years. If the yield to maturity of the bond is 6.7%, what is the duration of the bond? A. 6.7 years B. 8.0 years C. 10 years D. 13 years
What is the yield-to-maturity of a bond maturing in four years with a 4% coupon rate,...

What is the yield-to-maturity of a bond maturing in four years with a 4% coupon rate, a $1010 current price and a $1,000 par value please show work and the original formula used

a. What is the duration of a zero-coupon bond that has eight years to maturity? b....

a. What is the duration of a zero-coupon bond that has eight years to maturity? b. What is the duration if the maturity increases to 10 years? c. What is the duration if the maturity increases to 12 years? a. Duration of the bond b. Duration of the bond c. Duration of the bond years years years