Question

What is the duration (D) of a 2-year bond with a $69 annual coupon (paid annually),...

What is the duration (D) of a 2-year bond with a $69 annual coupon (paid annually), $1,000 par, and a yield of 3.5%? Record your answer to the nearest 0.001 years.

Homework Answers

Answer #1

Present value of year 1 cash flow = 69 / (1 + 0.035) = 66.6667

Present value of year 2 cash flow = (1000 + 69) / (1 + 0.035)^2

Present value of year 2 cash flow = 1069 / 1.071225 = 997.922939

Total value = 66.6667 + 997.922939 = 1,064.5896

Weight of year 1 cash flow = (66.6667 / 1064.5896) = 0.062622

Weight of year 2 cash flow = (997.922939 / 1064.5896) = 0.937378

1. weight * period = 0.062622 * 1 = 0.062622

2.. weight * period = 0.937378 * 2 = 1.874756

Duration = 0.062622 + 1.874756

Duration = 1.937

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
a. What is the duration of a two-year bond that pays an annual coupon of 10.3...
a. What is the duration of a two-year bond that pays an annual coupon of 10.3 percent and has a current yield to maturity of 12.3 percent? Use $1,000 as the face value. (Do not round intermediate calculations. Round your answer to 4 decimal places. (e.g., 32.1616)) b. What is the duration of a two-year zero-coupon bond that is yielding 11.5 percent? Use $1,000 as the face value. a. Duration years b. Duration years
a. What is the duration of a two-year bond that pays an annual coupon of 11...
a. What is the duration of a two-year bond that pays an annual coupon of 11 percent and has a current yield to maturity of 13.7 percent? Use $1,000 as the face value. (Do not round intermediate calculations. Round your answer to 4 decimal places. (e.g., 32.1616)) (in years) b. What is the duration of a two-year zero-coupon bond that is yielding 11.5 percent? Use $1,000 as the face value. (in years )
What is the duration of a four year bond with 10 percent coupon paid annually and...
What is the duration of a four year bond with 10 percent coupon paid annually and 8 percent rate of return? Assume Face value equals $1,000.
Calculate the modified duration of a 9% coupon $1,000 par value 2-year bond with coupon paid...
Calculate the modified duration of a 9% coupon $1,000 par value 2-year bond with coupon paid every 4 months and yield-to-maturity of 12%.
The duration (in years) of a $1000, 2-year, 8% coupon bond (interest paid semi-annually) is _____...
The duration (in years) of a $1000, 2-year, 8% coupon bond (interest paid semi-annually) is _____ year(s) when market rates are 10%? A. 1.91 B. 1.94 C. 2.00 D. 1.89
The duration of a par value bond with a coupon rate of 6% (paid annually) and...
The duration of a par value bond with a coupon rate of 6% (paid annually) and a remaining time to maturity of 5 years is
What is the duration of a two-year bond that pays an annual coupon of 11 percent...
What is the duration of a two-year bond that pays an annual coupon of 11 percent and has a current yield to maturity of 13.7 percent? Use $1,000 as the face value. (Do not round intermediate calculations. Round your answer to 4 decimal places. (e.g., 32.1616)) Duration=? years
1. Why are long-term, fixed-rate bond values more sensitive to interest rate changes than short-term, fixed-rate...
1. Why are long-term, fixed-rate bond values more sensitive to interest rate changes than short-term, fixed-rate bond values? (Maximum 4 sentences, maximum 100 words.) 2. 2 years ago, you paid $1069 for a $1,000 par bond that has a 7% coupon with semiannual payments. You are selling it today for $1000. You reinvested coupons at the 2.2% annual rate. What is your total return? (Report your answer to two decimals, without the % symbol. E.g., if your answer is 5.1538%,...
a) First, consider a 10 year bond with a coupon rate of 7% and annual coupon...
a) First, consider a 10 year bond with a coupon rate of 7% and annual coupon payments. Draw a graph showing the relationship between the price and the interest on this bond. The price should be on the y- axis and the interest rate on the x-axis. To compute the various prices, consider interest rates between 2% and 12% (use 0.5% increments). So your x-axis should go from 2%, then 2.5% ... until 11.5% and then 12%. Is the relationship...
A six-year bond with a par value of $1,000 with a coupon rate of 9% (paid...
A six-year bond with a par value of $1,000 with a coupon rate of 9% (paid annually) is selling to yield 8.5% per annum. This bond has a modified duration of Select one: a. 3.23 years. b. 3.49 years. c. 3.25 years. d. 4.23 years. e. 4.47 years.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT