Question

Problem 16-5 Find the duration of a 4.0% coupon bond making semiannually coupon payments if it has three years until maturity and has a yield to maturity of 6.0%. What is the duration if the yield to maturity is 8.0%? Note: The face value of the bond is $100. (Do not round intermediate calculations. Round your answers to 4 decimal places.) Years 6% YTM 8% YTM : Years

Answer 1

6% YTM:

Time until payment(1) Payment discounted at YTM discounted payment weight(4) 0.943396226 3.773584906 0.039867157 0.88999644 3.55998576 0.037610525 3 104 0.839619283 87.32040544 0.922522318 94.65 Duration 1x4 0.04 0.075 2.768 2.8827

8% YTM:

184 Time until payment(1) Payment discounted at YTM discounted payment weight(4) 0.925925926 3.703703704 0.041293758 0.041 0.85733882 3.429355281 0.038234961 0.076 104 0.793832241 82.55855307 0.920471281 2.761 89.69 Duration 2.8792