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 =
| 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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