What is the duration of a two-year bond that pays an annual coupon of 10 percent

Question

What is the duration of a two-year bond that pays an annual coupon of 10 percent and has a current yield to maturity of 12 percent? Use $1,000 as the face value. (Do not round intermediate calculations. Round your answer to 4 decimal places. (e.g., 32.1616))

What is the duration of a two-year zero-coupon bond that is yielding 11.5 percent?

What is the duration of a two-year bond that pays an annual coupon of 10 percent and has a current yield to maturity of 12 percent? Use $1,000 as the face value. (Do not round intermediate calculations. Round your answer to 4 decimal places. (e.g., 32.1616))

Explanation / Answer

Answers

1. Present value of cash flows from bond = (1000*10%)*1.6901 + 1000 * 0.8264

= $2516.50

Bond Duration = $2516.50/1000 = 2.52 Years

2. Present value of cash flows from bond = (1000*11.5%)*1.7012 + 1000 * 0.8044

= $1000

Bond Duration = $1000/1000 = 1 Year

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