Homework Answers
Answer:
Correct answer is:
b. 1 year
Explanation:
Duration =
In this formula of duration, when t = 1, numerator will be equal to denominator; hence duration will be = 1.
For this certificate of deposit:
Let us assume the CD is of $100
Year 1 Cash flow = $100 * (1 + 2.75%) = $102.75
Hence Duration = $102.75 * 1 / $102.75 = 1
Hence duration of 1 year certificate of deposit = 1 year
Hence option b is correct and other options a, c and d are incorrect.
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please include details
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