Answered

Welcome to Westonci.ca, where finding answers to your questions is made simple by our community of experts. Join our platform to get reliable answers to your questions from a knowledgeable community of experts. Get quick and reliable solutions to your questions from a community of experienced experts on our platform.

The current price of an annual coupon bond is 100. The derivative of the price of the bond with respect to the yield to maturity is -700.The yield to maturity is an annual effective rate of 8%. Calculate the duration of the bond.

Sagot :

Answer:

The duration of the bond = 7.56 years

Explanation:

Given the current price = 100

DM = -1 x Current derivative price / Current price

DM = (-1 x -$700 / $100)

DM = 7

Now,  D = DM (1 + r)

D = 7 (1 + 0.08)

D = 7.56

The duration of the bond = 7.56 years

We appreciate your visit. Hopefully, the answers you found were beneficial. Don't hesitate to come back for more information. We hope this was helpful. Please come back whenever you need more information or answers to your queries. Keep exploring Westonci.ca for more insightful answers to your questions. We're here to help.