Question

Find the duration of a bond with settlement date June 16, 2016, and maturity date December 25, 2025. The coupon rate of the bond is 5%, and the bond pays coupons semiannually. The bond is selling at a yield to maturity of 6%. (Do not round intermediate calculations. Round your answers to 4 decimal places.)

Macaulay duration =

Modified duration =

Answer 1

The macaulay duration can be easily calculated from the Excel formula:

=DURATION(Settlement Date,Maturity Date,Coupon,Yield,Frequency)

Particular	Date/Value
Settlement Date(s)	16-06-2016
Maturity Date(m)	25-12-2025
Coupon(c)	5%
Yield(y)	6%
Frequency(f)	2
Macaulay Duration is calculated as
Macaulay Duration	7.4200
	=DURATION(s,m,c,y,f)

Modified Duration = Macaulay Duration/(1+y/f)

= 7.4200/(1+0.06/2)

= 7.2039

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