Register
The current price of an annual coupon bond is 100. The derivative of the price of the bond with respect to the yield to maturity is -700.The yield to maturity is an annual effective rate of 8%. Calculate
465,433 views
19 votes
19 votes
The current price of an annual coupon bond is 100. The derivative of the price of the bond with respect to the yield to maturity is -700.The yield to maturity is an annual effective rate of 8%. Calculate the duration of the bond.

User Zeflex
by
2.8k points

1 Answer

21 votes
21 votes

Answer:

The duration of the bond = 7.56 years

Step-by-step explanation:

Given the current price = 100

DM = -1 x Current derivative price / Current price

DM = (-1 x -$700 / $100)

DM = 7

Now, D = DM (1 + r)

D = 7 (1 + 0.08)

D = 7.56

The duration of the bond = 7.56 years

User Leemon
by
3.3k points
Ask a Question
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.

1.6m questions

2.0m answers

Other Questions

If the rate of inflation in Japan dramatically increases while the rate of inflation in the United States remains constant, then a. the demand curve for dollars shifts to the left. b. the demand curve
If you buy a one-year bond for $4,000 and the issuer pays you back $5,000 at the end of one year, the interest rate on the bond is
The market value of the equity of Hudgins, Inc., is $582,000. The balance sheet shows $21,000 in cash and $192,000 in debt, while the income statement has EBIT of $93,000 and a total of $137,000 in depreciation
Kylie is risk averse and has $1,000 with which to make a financial investment. She has three options. Option A is a risk-free government bond that pays 5 percent interest each year for two years. Option
From the standpoint of the issuing company, a disadvantage of using bonds as a means of long-term financing is that Group of answer choices bond interest is deductible for tax purposes. interest must be
Link Copied!