Question

Find the duration o a 7% coupon bond makin annual coupon payments intermediate calculations. Round your answers to 4 decimal places.) has three yeas unti matu it and a yield to maturity o 6 what is e duration r m e to maturity S 1 5 Not ound YTM 7.6% YTM 11.6% YTM Duration

Answer 1

	Assume par value of the coupon =			$1,000
	Calculation of Annual Coupon Payments
	Par value of the bond issued is   =			$1,000
	Annual Coupon %			7.00%
	Annual Coupon Amount			$70.00
	Semi Annual Coupon Amount			$35.00
	Caclulation of the duration of the Bonds IF the YTM is 7.6% YTM
	Market rate of interest or Yield to Maturity or Required Return = 7.6%
	Bonds interest is paid semi annualy means so discounting factor = 7.6 % /2= 3.8 %
	Caclulation of the duration of the Bond
	Period (A)	Cash Flow (B)	Period X Cash Flow (AXB= C)	PV of $ 1 at 3.8% (D)	Present Value of the Cash Flow (CXD)
	1	$35.00	$35	0.96339	$33.72
	2	$35.00	$70	0.92812	$64.97
	3	$35.00	$105	0.89414	$93.89
	4	$35.00	$140	0.86141	$120.60
	5	$35.00	$175	0.82988	$145.23
	6	$35.00	$210	0.79950	$167.89
	6	$1,000	$6,000	0.79950	$4,796.97
					$5,423.26
		Duration =	$5,423.26
		Divide By =	"/"By
		Par Value =	1000
		Duration =	5.4233
		Answer = Duration of the Bonds = 5.4233
	Caclulation of the duration of the Bonds IF the YTM is 11.6% YTM
	Market rate of interest or Yield to Maturity or Required Return = 11.6%
	Bonds interest is paid semi annualy means so discounting factor = 11.6 % /2= 5.8 %
	Caclulation of the duration of the Bond
	Period (A)	Cash Flow (B)	Period X Cash Flow (AXB= C)	PV of $ 1 at 5.8% (D)	Present Value of the Cash Flow (CXD)
	1	$35.00	$35	0.94518	$33.08
	2	$35.00	$70	0.89336	$62.54
	3	$35.00	$105	0.84439	$88.66
	4	$35.00	$140	0.79810	$111.73
	5	$35.00	$175	0.75435	$132.01
	6	$35.00	$210	0.71299	$149.73
	6	$1,000	$6,000	0.71299	$4,277.97
					$4,855.72
		Duration =	$4,855.72
		Divide By =	"/"By
		Par Value =	$1,000
		Duration =	4.8557