Find the duration of a 6% coupon bond making annual coupon payments if it has th

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 8.0%. What is the duration if the yield to maturity is 12.0%? (Do not round intermediate calculations. Round your answers to 4 decimal places.)

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 8.0%. What is the duration if the yield to maturity is 12.0%? (Do not round intermediate calculations. Round your answers to 4 decimal places.)

Explanation / Answer

Calculation of Duration of Bond:

Duration of Bond at 8% = 2,682.714 / 1,000 = 2.6827

Duration of Bond at 10% = 2,412.756 / 1,000 = 2.4128

Period Cash Flow Period x Amount PV at 8% PV at 12% 1 60 60 0.9259 55.554 0.8928 53.568 2 60 120 0.8573 102.876 0.7972 95.664 3 1060 3,180 0.7938 2,524.284 0.7118 2,263.524 2,682.714 2,412.756

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