12000 par value 12-year bond with 10% annual coupons is priced at par. Calculate its modified dur...

Question

Question

12000 par value 12-year bond with 10% annual coupons is priced at par. Calculate its modified duration.

Answer 1

Answer #1

modified duration = Present value of Cash flows / 1 + rate

Present value of Cash flows for 12 Years = 6.813

(For 1 year 0.909 ,for 2 year 0.826....... till 12 th year 0.318 and add all 12 years factor it will come to 6.813)

modified duration = 6.813 / 1+10%

=6.813 / 1.1

=6.19

Answer 2

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