Question

A bond has 3 years to maturity, 8% coupon, 7% yield and pays annually. Suppose yield...

A bond has 3 years to maturity, 8% coupon, 7% yield and pays annually. Suppose yield decreases by 15 basis points, calculate the duration of your bond.

2.69 years

2.79 years

5.38 years

5.58 years

None of the above
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Answer #1

Note- New YTM will be = 7% - 0.15% =6.85%

Hence the duration will be 2.79 years

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