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compute a modified duration for a 5 year bond paying annual coupons of 8% and having...

compute a modified duration for a 5 year bond paying annual coupons of 8% and having a yield to maturity of 5.5%. a. 4.12 b. 5.00 c. 4.35 d. 4.74 e. 3.
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Answer #1

Sol:

Period = 5 years

Coupon rate = 8%

Yield to maturity = 5.5%

We can find Modified Duration with the help of MDURATION function in excel:

Settlement date 1/1/2020
Maturity date 1/1/2025
Coupon rate 8%
Yield to maturity 5.50%
Frequency 1
Modified Duration 4.12

Therefore modified duration of the bond will be 4.12

Answer is a. 4.12

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