Question

# 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) Coupon = 10.3%*1000 = 103.00,YTM = 12.3%

 Time(n) Cash flow PV of Cash flow=Cash Flow/(1+r)^n PV*Time 1 103 91.72 91.7186109 2 1103 874.61 1749.22629 Total 966.33 1840.9449 Duration 1.9051 (=1840.9449/966.33)

b) YTM = 11.5%

 Time(n) Cash flow PV of Cash flow=Cash Flow/(1+r)^n PV*Time 1 0 0.00 0 2 1000 804.36 1608.71926 Total 804.36 1608.71926 Duration 2.0000 (=1608.71926/804.36)

Please Discuss in case of Doubt

Best of Luck. God Bless

#### Earn Coins

Coins can be redeemed for fabulous gifts.