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A zero-coupon bond is selling at a deep discount price of $450. It matures in 11 years. If the yield to maturity of the bond is 6.2%, what is the duration of the bond (rounded to two places)

User Asimkon
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Answer:

Duration is 11 years

Step-by-step explanation:

The Duration of a zero coupon bond is equal to it's maturity. Since it matures at 11 years the duration of the bond is therefore also 11 years.

It is a bond that pays no interest. A zero-coupon bond is a bond where the face value is what is repaid during the time of maturity. There are no periodic interest payments, or have so-called coupons, that is why they are referred to as zero-coupon bond. Investor gets par value when it matures.

User Darrenp
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