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Assume coupons are paid annually. Here are the prices of three bonds with 10-year maturities: Bond...

Assume coupons are paid annually. Here are the prices of three bonds with 10-year maturities:

Bond Coupon (%) Price (%)
3 87.50
5 106.50
9 137.50

a. What is the yield to maturity of each bond?

b. What is the duration of each bond?

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Answer #1

calculation of duration

(a)A bond that has a yield to maturity of 4.50%, a par value of $875.00, a coupon rate of 3.00%, and a cash-flow frequency of 1 time(s) per year will have a duration of 8.69 years.

(B)A bond that has a yield to maturity of 4.20%, a par value of $1,065.00, a coupon rate of 5.00%, and a cash-flow frequency of 1 time(s) per year will have a duration of 8.17 years.

(c)A bond that has a yield to maturity of 4.40%, a par value of $1,375.00, a coupon rate of 9.00%, and a cash-flow frequency of 1 time(s) per year will have a duration of 7.46 years.

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