Question

Find the duration of a bond with settlement date June 16, 2016, and maturity date December...

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 =

Homework Answers

Answer #1
Given
Settlement date 16-Jun-2016
maturity date 25-Dec-2025
Coupon 5.00%
yield 6.00%
frequency 2 (semi-annually)
Macaulay Duration                       7.20 (Using "MDURATION" function in excel)
working MDURATION("16-jun-2016","25-dec-2025",5%,6%,2)
Note: We have assumed par value of bond as $100.
Modified Duration= Macaulay Duration/(1+(YTM/n))
YTM=yield to maturity
n=no. of coupon period per year
So modified duration = 7.2/(1+(0.06/2))
=                       6.99
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