Question

Find the duration of a 6% coupon bond making annual coupon payments if it has three years until maturity and a yield to maturity of 7.9%. What is the duration if the yield to maturity is 11.9%

Answer 1

Duration of the bond = 2.83 years

Step-by-step explanation:

PMT = 1000*6% = 60

YTM = 7.90%

Year PMT PV of PMT Weight Year*Weight

1 60 55.60704356 0.05847545953 0.05847545953

2 60 51.53572156 0.05419412375 0.1083882475

3 1060 843.8039056 0.8873304167 2.66199125

Sum 950.9466707 2.82885495703

Duration of the bond = 2.82885495703

Duration of the bond = 2.83 years