Question

Consider a coupon bond with C = 6, M = 100, and n = 20. Assume...

Consider a coupon bond with C = 6, M = 100, and n = 20. Assume a flat spot curve, and y = .06

Calculate modified duration.

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Answer #1

Coupon Amount = 6

Maturity value (Face value) = 100

Couon rate (c) = 6/100 = 0.06

Yield rate (y) = 0.06

Maturity (n) = 20

Firstly, calculated the duration of Bond with following equation:

putting values

Now, Modified Duration(M'D) can be computed with following equation:

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