Asked by
Thaksen Parvat
on Oct 19, 2024
Verified
A bond pays annual interest. Its coupon rate is 9%. Its value at maturity is $1,000. It matures in 4 years. Its yield to maturity is currently 6%.
The duration of this bond is ________ years.
A) 2.44
B) 3.23
C) 3.56
D) 4.1
Annual Interest
The percentage of interest that will be charged or earned on an investment or loan, calculated on an annual basis.
Coupon Rate
The annual interest rate paid by the issuer of a bond to the bondholder, usually expressed as a percentage of the bond's face value.
Duration
A measure of the sensitivity of the price of a bond or other debt instrument to changes in interest rates.
- Gain insight into the methods and implications of measuring bond duration and modified duration.
Verified Answer
RS
Learning Objectives
- Gain insight into the methods and implications of measuring bond duration and modified duration.